Bulgaria’s coalition government negotiations: Deal on several points of finance policy

The final day of consultations among the four Bulgarian parties on the policies of a possible future government saw agreement on several points of finance policy.

Convened by the We Continue the Change (WCC) party and streamed live, the negotiations also involve the Bulgarian Socialist Party (BSP), Slavi Trifonov’s ITN party and the Democratic Bulgaria coalition. Together, they amount to the “WCC+3” and between them have enough seats in the newly-elected Parliament to vote a government into office.

At a session lasting several hours on November 27, the working group on finance policy agreed that the rate of value-added tax (VAT) should remain unchanged in 2022, except for sectors where it had been reduced to nine per cent as a response to the Covid-19 pandemic. These are restaurants, tour operators, books and baby foods.

The meeting agreed that next year there should be an analysis regarding a proposal by the BSP to cut VAT on basic foodstuffs, services and medicines.

There was agreement to gradually increase the threshold for mandatory registration for VAT, starting by raising it to 100 000 leva until reaching 165 000 leva in 2024, the threshold allowed by EU rules. It was agreed that there should be tougher penalties for non-compliance with VAT law.

A proposal by WCC that Budget 2022 should be adopted by the end of January was agreed to. WCC co-leader Assen Vassilev, who seeks the finance ministry portfolio in a possible future government, said that approval of a Budget would not be feasible before then, as the cabinet structure would change, in turn affecting budget items.

The meeting foresaw the Budget for next year being amended via a revision in July.

It was agreed that the taxation system would not be changed, while there should be stepped-up revenue collection.

Participants in the working group agreed to retain the current threshold for cash payments at 10 000 leva.

WCC proposed that the withdrawal of amounts larger than 10 000 leva from banks should be reported to the State Agency for National Security (SANS), and that transfers abroad of more than a million leva be reported to SANS.

The meeting accepted a proposal by ITN to conduct a review of the regulation of financial markets and of the activities of the regulators.

Participants agreed that “weekend tax” – a tax introduced in 2016 on the use of company assets out of office hours – should be abolished. The meeting was told that “weekend tax” brings in a paltry 16 million leva revenue a year, and was inappropriate when the pandemic meant many people were working from home.

The 60:40 and 80:20 payroll support measures – involving the state picking up the bulk of payroll costs while employers are obliged to pay the remainder – will continue. There was agreement to hold talks with central Bulgarian National Bank on reintroducing a temporary moratorium on repayments of loans.

The minimum salary will become 700 leva next year and then will be calculated as a percentage of the average salary.

The afternoon of November 27 saw the start of the meeting of the working group on foreign policy, the final session at the close of the five days of talks among the WCC+3. Plans are for the consultations among working groups on 18 policy areas to be followed by talks among leaders of the parties and coalitions, towards the signing of a coalition government agreement.

(Photo: Interior Ministry press centre)

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