Unions with idea to raise business tax from 10 to 15%
The state will not raise taxes next year, but will cut spending. This is clear from the options for the budget that are being prepared in the Ministry of Finance, according to people familiar with the matter.
One foresees the return of VAT rates to 20% and was discussed yesterday at the tripartite council, in which trade unions and employers participate.
After the meeting, acting finance minister Lyudmila Petkova announced that no increase in taxes is planned. She confirmed her promise from a month ago to calculate the state’s money so that the deficit would be 3%. Only the return of VAT to 20% for bread and restaurants is at stake. The finance department has calculated that this will bring BGN 400 million more.
There were also informal talks with employers, political parties, trade unions and the Association of Municipalities about whether it is possible to raise taxes. Such a measure did not find support. On Monday, however, the National Security Council announced that they have proposals for changes that will increase budget revenues by BGN 4.7 billion. These include raising the corporate tax rate from 10 to 15% and a financial transaction tax.
In finance, they have also made a second option, in which a reduction in capital expenditure is foreseen. However, the deficit fell to 6%, not the target of 3%. It is therefore suggested that a request to extend the current budget may be made in the hope that a regular cabinet will be in place.
The spending problems are happening for the second time in two years because of the elections and the series of cabinet appointments. At the end of 2022, then Acting Minister of Finance Rositsa Velkova predicted a 6.9% deficit for 2023 due to new expenses. The case was resolved without raising taxes, but investments were curtailed. There were also higher revenues from high inflation, and the first payment of over BGN 2.6 billion under the recovery plan came.
Petkova recently stated that next year there will be a deficit of BGN 18 billion, which is almost 9% of GDP. It was formed from 6 billion for this year and another 12 billion for the next. The money was accumulated because of expenses as a result of decisions of the National Assembly.
Thus, the deputies of the new parliament will have to decide whether to extend the current budget until March and for a regular government to submit new estimates. This means spending as much money in each of the first three months of 2025 as in the same months of this year. The second option is for parliament to cut spending to shrink the deficit and not prevent entry into the eurozone.
The unofficial accounts of the Ministry of Finance show that there are reserves in reducing costs for personnel, for pensions and social payments, from which several billion BGN will be saved. Some municipal projects under the program for their financing will certainly fall away. It is already close to BGN 8 billion, but most of the payments are in 2026. The money for maintaining the administration can also be significantly reduced – there were reserves for nearly BGN 2 billion.
After the meeting of the tripartite council, Petkova reminded again that the deputies have another important task – to quickly adopt the necessary reforms in order to renegotiate the recovery plan. Petkova also announced that the submission of a draft budget will be delayed after October 30, as is required by law, due to the lack of a functioning parliament.