The Bulgarian Hotel and Restaurant Association (BHRA) has spoken out against the proposal by the ruling majority to increase value-added tax (VAT) on wine and beer to 20 per cent, saying that this will doom restaurants to bankruptcy.
The proposal by the ruling majority was announced on May 18 as among measures to counter the impact of mounting inflation.
As The Sofia Globe reported at the time, Bulgaria’s National Assembly approved on July 30 2020 the second reading of amendments to the Value-Added Tax Act, reducing the tax rate on wine and beer sales in restaurants, charter bus services, gyms and other sports facilities from 20 per cent to nine per cent. The step was intended to reduce the economic impact of the Covid-19 pandemic.
BHRA deputy chairperson Atanas Dimitrov said in a statement that the restaurant business was labour-intensive but because there was no VAT on labour, companies could not claim a tax credit. At the same time, labour shortages in the industry meant that wages had to be higher.
BHRA cited data from HOTREC, the umbrella Association of Hotels, Restaurants, Pubs and Cafes and similar establishments in Europe, as showing that in a number of European countries, the VAT rate was differentiated for the restaurant sector.
Dimitrov rejected claims that collection of tax on the sector had not significantly increased.
“This is a targeted attack on this business,” Dimitrov said.
Given the fact that for the last two years we have had no activity for almost a year and a half, how then to prove collectability at non-operating establishments?” he said.
“Moreover, in the field of services we work for the pleasure of the people. And when they are economically pressured – by a pandemic, by rising prices, by inflation, the first thing they give up is pleasure, that is, our services. The increase in VAT will make our product unsellable and the consequences for business unpredictable.”
BHRA chairperson Georgi Shterev said that the change “once again shows that tourism is not a priority of this government”.
Meanwhile, reports on May 19 quoted Bulgaria’s baking industry as saying that the ruling majority’s proposal to reduce VAT on bread from 20 per cent to zero would not result in bread being cheaper.
This was because their production costs were continuing to rise.
Tosho Nyagolov, a bread producer in the north-eastern Bulgarian town of General Toshevo, told bTV: “Every day our costs are growing, for flour, which has risen 100 per cent since September, prices of natural gas, fuels and all other supplies are growing”.
Nyagolov said that it was not at all clear which types of bread would be eligible for zero-rating for VAT.
“From Monday, the price of flour will rise by 50 leva per ton. This will increase the price of bread by five to 10 stotinki. It is unlikely that zero per cent VAT will lower the price from July 1, it may rather maintain it unchanged,” he said.