‘Big hole’ in Bulgaria’s budget can be filled by increasing VAT or other revenue – PM

‘Big hole’ in Bulgaria’s budget can be filled by increasing VAT or other revenue – PM

There is a big hole in Bulgaria's budget that can be filled only by increasing value-added tax (VAT) or some other means of increasing income, Prime Minister Boyko Borissov said on April 29 2010. Speaking on Bulgarian National Television (BNT), Borissov said that about half of the package of anti-crisis measures that had been agreed at meetings among representatives of the Government, employers and trades unions may be implemented only in 2011 because there were "constitutional issues" about bringing them in now. The previous day, Borissov said that the Cabinet would decide on May 5, at its regular meeting, whether and by how much VAT would be raised. Currently, VAT in Bulgaria is charged at a rate of 20 per cent, with an exemption for packages for foreign tourists which are levied a special reduced rate of seven per cent. He said that he had said from the outset that if the anti-crisis measures did not produce the required results, VAT would have to be increased. National Revenue Agency (NRA) executive director Krasimir Stefanov told BNT that the decline in revenue had been continuing in April 2010. Between January and April 17, revenue had been 900 million leva less than in the same period of 2009. The gap has increased by 57 million leva in a mere two weeks after a deficit of 843 million leva at the end of March. VAT income had decreased the most, by 600 million leva. Corporate tax revenues had decreased by 240 million leva, excluding tax rebates. Speaking to Nova Televisia on April 28, Finance Minister Simeon Dyankov said that a potential VAT increase would hurt domestic consumption, which is currently the most pressing challenge for the Bulgarian economy. Dyankov said that before it makes a final decision, the Cabinet would assess the shape of the economy to check whether there has been some improvement. He said that Bulgaria was currently headed for a balanced monthly budget, and with only two to three days before the end of April, he hoped that things would not change. Dyankov told Nova that he had forecast that there would be a deficit in January to March, with stabilisation beginning in April. Given the Government's stable fiscal policy, economic recovery could be expected to start this month, he said. According to Bulgaria's National Statistical Institute, in a report released on April 28, the country's general business climate index increased by 4.4 points between March and April 2010. The institute said that the improved figures were due to the more favourable opinions among top executives from all sectors, including industry, construction, retail trade and the service sector. Bulgarian-language media quoted Dyankov as saying of the figures that the trend was due to the Government striving to pay its debts to the private sector as fast as possible, and its approach of keeping taxes low.

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