Zero-rating bread for value-added tax (VAT) for a year and significantly increasing pensions are among proposed measures announced on May 18 by Bulgaria’s ruling majority following a coalition council meeting the night before to discuss steps to counter the effects of mounting inflation

Zero-rating bread for value-added tax (VAT) for a year and significantly increasing pensions are among proposed measures announced on May 18 by Bulgaria’s ruling majority following a coalition council meeting the night before to discuss steps to counter the effects of mounting inflation

“The goal is to support those most vulnerable to the effects of inflation, young families with children, as well as focusing on fuels and electricity,” Prime Minister Kiril Petkov told a briefing.

The measures are worth a total of two billion leva, Petkov said.

Some measures will require legislative amendments and plans are to include them in an update to Bulgaria’s national Budget, to be put to Parliament in mid-year. Some will be in effect from July until the end of the year, and others in effect for a year.

According to the ruling coalition, pensions will be updated as of July 1 by an average of 20 per cent, instead of the current 6.1 per cent.

The 60 leva a month “Covid supplement” for pensioners will be incorporated into pensions on a permanent basis, while there will be individual adjustments for categories of pensioners.

The proposal is that from July 1, the minimum pension will be 467 leva a month. According to Petkov, this is an increase of 55 per cent compared with the minimum pension a year and a half ago.

The pensions of 770 000 retirees will be recalculated from October 1 in line with the so-called “Swiss rule”.

The ceiling for pensions will become 3400 leva, the same as the maximum income insurance.

For a period of one year, VAT on bread will be reduced to zero per cent, while for the same period, the VAT on wine and beer will be restored to its previous 20 per cent.

Also for one year, VAT on heating and hot water will be nine per cent.

VAT on natural gas for end users and household use will be cut to nine per cent for a year, while VAT on books will be maintained at nine per cent.

The ruling majority proposes to scrap excise duty on some energy sources –  electricity, natural gas and methane.

It will be “recommended” to the energy regulator to have dual rates for electricity, water, heating and gas , based on consumption per household, with the aim of introducing a reduced tariff for lower consumption.

There is also a proposal for compensation for high fuel prices.

Until the end of 2022, individuals – but not companies – will get a discount of 25 stotinki a litre for A95 unleaded petrol, diesel, methane and propane-butane.

Assen Vassilev, Deputy Prime Minister and Finance Minister, said that there would be no limit on quantities purchased, but there would be restrictions on the type of fuel for which the discount is applicable. It would be given only for A95 with no additives and diesel with no additives.

It was not immediately clear how the fuel discount scheme would be implemented.

Vassilev said that this would be discussed with the fuel stations, either by the issuing of an invoice to a natural person or by the fuel station notifying the National Revenue Agency.

The package of anti-crisis measures also includes raising the bar for mandatory VAT registration from 50 000 to 100 000 leva.

The government intends reduce the interest rate for overdue payments to the state, municipalities, utilities and others by up to eight per cent.

It is envisaged to tax the excess profits of electricity in order to compensate non-household consumers.

In support of families with children, the package envisages increasing the tax rebate for children from 4500 to 6000 leva a year as a long-term measure, and it will be possible to use this every three months during the year. Petkov said that in other words, families with children would be able to receive this tax relief immediately.

The government will also increase the annual quota for food vouchers for employees from one billion to 1.2 billion leva.

The announcement by the ruling coalition came on the day that numerous protests were being held around Bulgaria, mainly in connection with rising energy costs and other cost-of-living issues.

The proposals were announced a day after, as The Sofia Globe reported, the National Statistical Institute released figures showing that Bulgaria’s annual consumer price index (CPI) recorded 14.4 per cent inflation in April 2022, the country’s the highest year-on-year increase in consumer prices since July 2008.

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