On the occasion of the upcoming discussion of the proposed changes to the state budget by the Council of Ministers of the 51st National Assembly, the Institute of Certified Public Accountants in Bulgaria (ICES) shared its official opinion on the proposals, warning that the discussed changes put business in Bulgaria in an uncompetitive position.
One of the main cases in the proposals arises with the changes to the Corporate Income Tax Act. Experts are of the opinion that such a tax policy exposes Bulgarian business to risk, without at the same time achieving any significant relief for the country's budget deficits. Currently, Bulgaria is the only EU country that has introduced a national additional tax, but at the same time does not allow full relief for essential business activities. As a result, the country risks becoming one of the EU countries with the highest effective tax burden on the services sector, where personnel costs have the largest share. The effect is particularly pronounced in the information technology and outsourcing sectors, which have made the largest contribution to GDP growth in recent years.
In addition, IDES experts also comment on the Draft Law on the State Social Security Budget for 2025, which further aggravates personnel costs in the country. IDES does not support the proposed subsequent increase in the maximum social security income to 4,130 leva, as well as the increase in the minimum wage, respectively the minimum social security income. According to the certified public accountants, this would lead to an administrative increase in the personnel costs of employers in Bulgaria and a significant deterioration in the attractiveness of Bulgaria as an investment destination.
Some of the proposed changes also relate to the Value Added Tax Act. Financial experts are of the opinion that the application of differentiated VAT rates is an ineffective social and unsuccessful tax policy, in which the state budget loses significant VAT revenues without achieving the intended effects in terms of the prices of the goods for which the tax rate is lowered. For this reason, the IDES supports the abolition of temporary reduced VAT rates, as well as the application of undifferentiated VAT rates for medicinal products, including advising against extending the deadline for applying a zero VAT rate for bread and flour.
At the same time, the IDES does not support the group of measures called the “tax amnesty“, proposed in the draft law on the state budget for 2025, due to the fact that these measures send a very bad signal to honest taxpayers.
The information presented about the possible intervention of the BDB (Bulgarian Development Bank) in a scheme for financing taxpayers with outstanding tax liabilities is extremely worrying. After analyzing the published information, the Institute's representatives commented that this creates the impression that the goal is not to have real additional revenues in the state budget, but to turn unpaid debts to the NRA into unpaid debts to the BDB, thus temporarily achieving the goal of a 3% budget deficit.