In a bold move to shrink Bulgaria's budget deficit to 3%, the caretaker minister of Finance Lyudmila Petkova is ready to discuss a series of financial adjustments with key stakeholders. These adjustments include a 3% increase in insurance rates, the suspension of some wage increases, a new tax on bank profits, higher taxation on gambling, a shock rise in excise duty on cigarettes, the abolition of different VAT rates and a unique amnesty for unsettled taxes, revealed "24 hours".
Petkova's strategy unfolds a comprehensive plan,
aimed at balancing the nation's books. By postponing next year's budget, it intends to ensure a precise equalization of revenue and expenditure, aiming for a 3% deficit. This approach requires bridging a significant funding gap with measures designed to generate significant revenue and savings.
For now, no higher VAT is foreseen. However, it is planned to cancel the reduced VAT rates on the restaurant business and bread, and the expected effect is BGN 400 million. The excise rates on cigarettes, planned according to the calendar of the Ministry of Finance for the next two years to be combined into one, are also being discussed by Petkova's experts.
Innovative revenue generation measures
Among the innovative proposals is the introduction of a tax on bank profits, which is expected to bring in around BGN 250 million. In addition, the plan proposes increasing the tax on gambling revenues from 20% to 30%, potentially adding another 100 BGN million. A proposed tax on mining could replace the current concession fee for the extraction of resources, further strengthening the state treasury.
Tax amnesty: Main source of revenue
A distinctive feature of Petkova's plan is the tax amnesty, which is expected to significantly increase revenues in the treasury. This amnesty will cover both unpaid tax liabilities and undeclared income, offering a reprieve on fines and interest. This move alone can bring about BGN 4.5 billion to the budget.
Corrections and Savings
The proposal also foresees adjustments in VAT rates for certain sectors and discusses the unification of excise rates on tobacco products. One notable cost-saving measure involves delaying public sector wage increases, potentially saving BGN 750 million. In addition, the plan considers the annual determinations of average wages and social security, aiming for a 10% reduction in administrative costs.
A Balanced Approach to Fiscal Health
Petkova's complex package of measures aims to ensure fiscal stability of Bulgaria without imposing additional tax burdens on the population. By carefully balancing revenue growth and spending control, the plan aims to achieve a sustainable budget deficit, align with Eurozone criteria and put Bulgaria on the path to economic stability.