Bulgarian President Radev vetoes Corporate Tax Act amendments

Written by on November 13, 2018 in Bulgaria - Comments Off on Bulgarian President Radev vetoes Corporate Tax Act amendments

Bulgaria’s President Roumen Radev said on November 13 that he has vetoed four provisions in the amendments to the Corporate Tax Act, passed by Parliament last week as part of the 2019 Budget process, arguing that they infringed on “constitutionally-recognised civil rights and legal obligations.”

The first provision covered by the veto is on the changed framework of annual car taxes setting the range of taxation rates for local administrations, which levy and collect the taxes.

Under the current law, the main factors determining the tax are the engine power and year of production, with newer and more powerful cars subject to higher taxes than older ones with weaker engines.

The amendments would introduce a new factor, namely the environmental standards of the car, with newer cars getting tax discounts and older ones receiving tax penalties.

The measure prompted lengthy debates in Parliament, with the opposition socialists criticising the amendments for raising the tax burden of people with low incomes. Radev, who was elected on the socialist ticket in 2016, echoed their criticism in his veto arguments.

“The state of cars in a country is a projection of the standard of living and an indicator of the existing social divisions in it. The new rules will place the tax burden on citizens with low and medium incomes, as well as small and medium-sized enterprises,” he said.

Additionally, he said that the amendments did not take into account additional factors such as frequency of use, the presence of engine catalysts or the type of fuel used. There was also no guarantee that the funds raised with this tax will be spent for environmental purposes.

Another tax hike vetoed by Radev was the higher tax rate on properties in resort areas, arguing that it breached previous rulings by the Constitutional Court, which have ruled out differentiated property tax rates based on intended use.

The third provision was the postponement of the deadline for reforming the framework used to calculate the household rubbish tax. Under a law passed last year, local authorities have to introduce new fees, based on the amount of rubbish collected, starting from January 2020, but the amendment extended the current framework, which is based on the tax valuation of a property, by two years, meaning the new taxes would go into effect in January 2022.

Radev said that the Cabinet gave no reasoning for its proposal to extend the use of the tax valuation framework, making it “especially unacceptable” to prolong a “constitutionally untenable regulation.”

Finally, the President vetoed a section in the transitional and final provisions of the Corporate Tax Act, which amended the Customs Act to transform the existing customs posts into territorial divisions of the central Customs Agency.

It was unacceptable to implement a major change in the operation of the agency through the transitional and final provisions of the Corporate Tax Act because the customs administration was outside the scope of that law, Radev said.

Additionally, Radev objected to the fact that under the new organisation, customs officials could be subject to arbitrary termination of employment without an option to appeal their firing in court, which breached the right of employment, enshrined in the constitution.

Radev’s veto on the Corporate Tax Act amendments was his seventh so far this year, with Parliament overturning all but one.

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