Bulgarian MPs approved at first reading on October 25 amendments to the country’s tax laws that will make interest on deposits subject to the 10 per cent flat income tax rate.
The bill passed with 86 votes in favour, 29 against and two abstentions.
During the debates preceding the vote, opposition politicians once again criticised the measure. From the left, former socialist finance minister Plamen Oresharski said that the tax will harm the state Budget more than help it, since it will diminish savings and, therefore, investment in the economy. From the right, Blue Coalition co-leader and former prime minister Ivan Kostov said that the new tax was just another source of revenue to support unreformed state institutions that would diminish household incomes.
In defence, MPs from the ruling party, GERB, said that the Government was expanding the tax base, rather than raising taxes – one of the party’s promises prior to the 2009 parliamentary election was that it would not increase taxes – and would not lead to an increased tax burden.
The tax would be levied only on deposits with a fixed term and be paid at the end of the month following the quarter in which the interest was due. Banks would be responsible for withholding the tax and paying it to the Budget.
The tax will go into effect on January 1 2013 and is expected to bring 120 million leva in Budget revenue – a minor, but much-needed boost, given the minimum wage hike to 310 leva and the planned increase of pensions by 9.3 per cent, on average, next year.
The tax will be levied on deposits held in Bulgarian banks, but also banks in other EU member states and European Economic Area countries, as well as Switzerland, with which Bulgaria recently signed an amended agreement to disclose banking information.
Domestic consumption has been sluggish in Bulgaria following the global economic crisis, but this has lead to an increase in savings. According to Bulgarian National Bank data, household savings have increased by 54 per cent since the end of 2008, reaching 34 billion leva (about 17.4 billion euro). Less than 10 per cent of all households, however, have savings of more than 20 000 leva (10 000 euro).
(Photo: Clive Leviev-Sawyer)