Bulgaria mulls VAT hike to shore up Budget deficit

Bulgaria mulls VAT hike to shore up Budget deficit

Bulgaria's Finance Ministry would draft a proposal with additional measures meant to raise Budget revenue and shore up the prospective deficit, Finance Minister Simeon Dyankov said on April 17. Speaking to Darik Radio, Dyankov would not reject speculation about a possible hike in the value-added tax (VAT) rate, which now stands at 20 per cent.The prospect was discussed in March by the tripartite council of Government, employer associations and labour unions, but was left out of the final package of 60 austerity measures that were projected to save 1.6 billion leva for the state Budget.Presenting the package in late March, Prime Minister Boyko Borissov said that if it failed to produce results, the VAT rate would be increased. The tripartite council reportedly discussed hikes of two and four percentage points.Dyankov said that the Government was revisiting the idea before implementing the stimulus measures because of a recommendation made by the European Commission at the meeting of European finance ministers in Madrid, namely that member states should have back-up plans in case the European economy entered double-dip recession.Dyankov said that, with the exception of Poland, all EU countries were showing fragile economic growth, backed mostly by third-country exports, worse-than-expected domestic consumer spending and failure to meet revenue targets.The head of Bulgaria's National Revenue Agency, Krassimir Stefanov, said earlier that Bulgaria had missed its first-quarter revenue target by almost 800 million leva, with the VAT shortfall the worst, at 600 million leva. Corporate tax receipts came in 170 million leva short of the target.Bulgaria could face a shortfall of two billion leva for the full year in the pessimistic scenario, Government sources told Dnevnik daily. Democrats for Strong Bulgaria (DSB) leader Ivan Kostov forecast that the figure could exceed four billion lev.NRA expected to collect 1.5 billion leva short of its 2010 target, while the Customs Agency would come more than 500 million leva short.The revenue agency sought to host a meeting between Bulgaria's major industry groups, retail chains and tourist sector representatives to discuss businesses' 2010 sales, profit and consumption forecasts.The downbeat forecast about Bulgaria's revenue comes just days after Dyankov said that full-year revenue was expected to fall 1.2 billion leva short of the Government target. The 60 stimulus measures, mapping out ways to cut costs and boost revenue, were drafted to keep the Budget deficit within three per cent of gross domestic product.

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