Bulgaria’s Government approved on October 10 the Budget bill, drafted by the Finance Ministry, along with a number of Budget-related amendments – most important among them, the introduction of a 10 per cent tax on deposit interest.
Speaking to reporters after the Cabinet meeting, Finance Minister Simeon Dyankov said that Bulgaria was the last European Union country not to tax deposit interest and it was right to tax this kind of capital gains.
“Deposit income is more typical for the wealthy. This way, someone working for a minimum wage pays tax and the wealthy, who keep their money in banks, do not. A group of people, rich people, have an income that is not taxed and that is odd,” Dyankov was quoted as saying by Focus news agency.
Reports of a tax on deposit interest appeared in Bulgarian media last month, but the Finance Ministry denied them at that time, saying that no such plans were under consideration. No mention of the plans were made last week either, when the ministry published the draft Budget and related legislative amendments on its website.
The tax will go into effect on January 1 2013 and would 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 measure was rejected by labour unions at the latest meeting of the tripartite consultative council that brings together employers, trade unions and Government, mediapool.bg reported.
Asked if the new tax will affect Bulgaria’s banks, Dyankov said that “the system has a huge [financial] resource, which has been increasing at a rate of half a billion leva each month.”
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).
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.
(Photo: Clive Leviev-Sawyer)