A temporary tax on excess profits of banks in Bulgaria could bring in over €1 billion euros to the budget and help reduce the deficit, without a general increase in corporate tax for the banking sector. This is stated by the Chairman of the Fiscal Council Simeon Dyankov in an analysis of the taxation of extraordinary profitability of banks in the European Union.
According to him, the measure should be aimed not at the entire profit of banks, but at the profitability above a predetermined historical profitability rate. Dyankov emphasizes that the tax should have a clearly defined deadline and not become a permanent increase in levies.
The interest rate environment has increased banks' income
As the main reason for the growth in bank profits after 2022, Dyankov points to the change in the interest rate environment. The increase in interest rates in Europe has increased income from loans and other interest-bearing assets, while interest rates on deposits have grown more slowly.
This difference has led to a significant increase in the banking sector's net interest income. According to the analysis, the high profitability is largely not the result of new investments, technological improvements or taking on additional entrepreneurial risk, but of the change in the macroeconomic and interest rate environment.
12 EU countries have already introduced additional taxation
The Fiscal Council points out that in recent years additional taxation of the banking sector has been introduced in 12 EU countries. These include Belgium, the Netherlands, Slovenia, Estonia, Latvia, Lithuania, the Czech Republic, Romania, Slovakia, Hungary, Spain and Italy.
The mechanisms are different - from a tax on excess profits or extraordinary net interest income to taxation of income and assets. Djankov gives Slovenia as an example of a measure introduced after the severe floods in 2023, when the additional revenues were linked to the country's reconstruction.
The measure must remain one-off
According to the Chairman of the Fiscal Council, the temporary nature of the taxation limits long-term economic distortions and uncertainty for investors. In his assessment, the one-off measure reduces the risk of a negative effect on bank capitalization and lending.
Djankov presents the expected over 1 billion euros as a possible source for reducing the budget deficit without raising taxes on a broad basis. At the moment, his statement is a position within the framework of an analysis, not information about an already introduced tax.
Sources: news.bg