The American Chamber of Commerce in Bulgaria (ACC) categorically opposes the additional tax burden proposed in the draft Budget of the Republic of Bulgaria for 2025 on strategic sectors for the Bulgarian economy, such as the mineral and raw materials industry. We find the introduction of a "tax on underground resources" unacceptable, which essentially demonstrates disproportionate treatment of economic entities operating on the territory of the European Union and introduces discriminatory situations with their double taxation. This was announced in a special position to the media. What caused this reaction from the ACC. Ivan Mihaylov, CEO of ATK, spoke to FACTI.
- Mr. Mihaylov, the draft budget for next year, which was officially presented by the Ministry of Finance, provides for the introduction of a “tax on underground resources“. How do you view this?
- In our position, we categorically oppose this proposal, as well as the manner and deadline in which it was announced. In our effort to work to improve the investment climate in our country – which means to do so in order to retain the companies operating here and to try to attract new investors, we cannot remain indifferent to attempts to introduce a new tax that is not targeted, but is intended to “clog“ of a fiscal hole caused by unbalanced spending in the state budget and by populist promises for which no revenues are planned.
Moreover, we were preparing for a larger position, because from the public information from the previous week it became clear that the burden of filling the lack of revenues in Budget 2025 will fall on several working in the light industry, including the mining industry and banking. The argument presented at the time was full of general formulations, which we interpret as pointing fingers at the fact that they are successful and contribute to the development of the country's economy. When the draft budget was announced, we were also surprised by the increase in excise duties on tobacco products and beer, as this move does not aim to improve the health status of Bulgarians, but rather directly affects individual consumption, which may lead to the growth of the gray sector. And this is exactly where our subsequent arguments are – why is the shadow economy not being fought, which in Bulgaria varies between 30-35% and is among the highest in the EU, and are value-added industries being "hit" in order to be part of the measures to reduce the deficit of either 12 or even 18 billion leva and to meet the set government spending of over 40% compared to 2024? We are also puzzled by the proposal for a tax amnesty, which directly damages both Bulgaria's reputation on world markets and conscientious taxpayers at the expense of unscrupulous economic entities.
- This is, after all, a draft budget, but was there a dialogue with the industry, was there an analysis of the benefits and risks...
- The bilateral chambers in our country are not a direct interested party in this process. But we are monitoring several major topics that concern the country's economy – The state budget, the NHIF budget, the LLC, because from the policies set forth in them - and someday reforms - business can plan its activities. After all, the state is the largest employer, the assignor of public procurement and the controller of economic activity in our country. And for this, timely institutional dialogue is needed, which was not the case with our colleagues from the Bulgarian Mining and Geological Chamber. Since the abolition of the "tax on excess profits of banks", we have understood that the public speaking of our colleagues from the Association of Banks in Bulgaria has led to their arguments being listened to at the last possible moment, which is a positive example.
Analysis of the benefits and risks, strictly speaking, is also missing in the current version of the draft budget. But we understand the efforts made to work to achieve a budget that is among the fulfilled conditions for Bulgaria's admission to the Eurozone. After missing a number of opportunities in the last 3-4 years - intentionally or due to the economic situation, any business association would object to this goal being achieved at the expense of its members or the business as a whole and without the necessary analysis, dialogue and search for other solutions to finance the deficit.
- Additional revenues are definitely being sought in the State Budget, but is this how it is being done?
- We are not aware of any specific assumptions or requirements that our colleagues in the Ministry of Finance were faced with, other than their argumentation about the existing legislative framework, achieving a 3% deficit and filling the “hole“ of 12 billion leva. Their argumentation cites the numbers from the updated medium-term budget forecast for the period 2025-2028, but the detailed analysis of the employers' organizations shows disagreement with it.
- The big philosophy of the budget is to achieve a 3% deficit. They are looking for money and, come on, a “tax on underground resources“. Is that how it turns out?
- In a wholesale sense - yes. But along with the questions raised above, I would like to point out a few more problems. Mining is a strategic sector with eight sub-sectors that are essential for our daily activities, as well as for national security, resource security, including the implementation of the Green Transition, which requires electricity, which must be produced and transported via copper wires. The topic of the competitiveness of the Bulgarian economy, which must produce products with high added value and rely on local natural resources, also affects the exploration of minerals - metallic, non-metallic and even gas on the shelf or on the territory of Bulgaria, which are part of the larger conversation about what kind of Bulgaria we want to have in the next (at least) 30 years.
- In the mining industry, we once had a concession - with rights and obligations, and now a tax. Double taxation occurs...
- This is one of the main arguments for the bankruptcy of the proposal. It is unacceptable to tax a sector and the enterprises in it twice. In addition, it is necessary to understand the essence of this industry: enterprises are first saved from bankruptcy, work to the highest standards, including and comply with ESG regulations, develop their regions and people, reinvest profits to ensure sustainable development. Also, ore mining is not like opening a hole and a river of copper, silver or gold flows. According to the University of Mining and Geology, there are a number of metal deposits in Bulgaria, but with a poor ore content, such as those currently operating. Thanks to developed technologies, the stable price of metals in recent years and engineering achievements, these enterprises are profitable. And care is needed from the state: compliance with concession contracts, implementation of the Mining Strategy or a new one, approval of sustainable new projects, as well as areas for exploration, and last but not least - permanent publicly stated support for the industry.
- And this is apparently being requested once only for this year. What is this?
- The position of the American Chamber of Commerce was that such levies, such as those imposed on the mining industry, even one-time ones according to recent promises from the Ministry of Finance, distort the investment environment. Because the amount that is set in the draft budget submitted to the National Assembly must be “seized” from the mining companies. For some, it nullifies their work in recent years. The increase in individual parameters is many times that agreed in the concession contracts and does not correspond to any internationally established practice. It reaches a state in which the economic balance between the concessionaire and the grantor (the state), in which benefits and risks are distributed, is disrupted. Here, the state wants to transfer the risk of the financial survival of the companies onto themselves, by seizing a certain amount and reaping the benefits for itself.
- From the mining industry, if this is accepted, an income of 900 million leva is expected. How would you comment on it?
- This method is untenable for a democratic state operating under the rules of the market economy, including respect for existing contracts and the specifics of the specific industry.
- Where is the principle of free competition? And how would this tax affect the sector?
- In the mining industry, we are not talking about competition - there are several significant companies operating with different types of deposits of metallic and non-metallic minerals. These companies have a long history. To give an idea of the business environment, the example is more than eloquent: the newest mine in our country was opened 5 years ago, and this happened 40 years after the last one was put into operation. This is an example of the lack of attention on the part of the state towards such a strategic sector, which, in addition to its main business, takes care of the regions, the resource security and contributes to the development of the country's economy.
PS. - the answers were taken at the end of the working day yesterday.