Amid the relentless barrage of criticism being levelled at Bulgaria’s Cabinet for its plans to introduce a tax on deposit interest, the Finance Ministry has been preparing proposals to further tax capital gains.
Amendments that would tax gambling winnings and stock market profits were being drafted by the ministry, and could be tabled in Parliament between the first and second readings of the 2013 Budget bill, Finance Minister Simeon Dyankov has said.
Dyankov has avoided media appearances since making the suggestions in an interview with private broadcaster Darik Radio at the weekend – not least in order to allow spirits to calm down after Dyankov said, in the same interview, that a progressive tax scale was better suited for Bulgaria’s economy. (The country introduced a flat 10 per cent tax in 2008.)
Even though the bulk of the criticism so far has been against the already-announced new tax, as opposed to possible new taxes that are yet to be tabled, the gambling and financial services industries have wasted no time in decrying the mooted proposals as a final nail in the coffin.
The gambling industry, already reeling from the indoors smoking ban that went into force in June, will lose even more customers, private broadcaster bTV reported on October 16. Industry sources, quoted by the report, said that gamblers used to paying no tax would be encouraged to turn to illegal gambling.
It was also unclear how exactly the ministry planned to tax the winnings. The proposal, reportedly, is yet to be discussed with the country’s gambling regulator.
Financial services companies, for their part, have drafted a list of arguments why taxing capital gains from financial markets was a bad idea. The letter would be sent to the Finance Ministry and the Cabinet on October 16, Darik reported.
The Bulgarian Stock Exchange, which saw its capitalisation soar during the economic boom of the 2000s, has been described as being on life support since the onset of the global economic downturn, which reduced the daily trading turnovers dramatically as investors stopped pumping in new money and stock prices plummeted.
The introduction of a capital gains tax on stock market profits would further scare investors away, and that at a time when Bulgaria is still trying to sell a majority stake in the Bulgarian Stock Exchange, Darik said.
(Finance Minister Simeon Dyankov. Photo: Finance Ministry)