ECONOMY

Bulgaria cuts corporate tax to 15 pct, lowers top income tax bracket to 24 pct

SOFIA (Reuters) – The Bulgarian government decided yesterday to cut corporate and income taxes to promote already thriving growth and appease voters ahead of general elections next year. Finance Minister Milen Velchev said taxes on companies would be cut to 15 percent from 19.5 percent at present, giving Bulgaria one of the lowest corporate tax burdens in Eastern Europe and providing a large incentive for foreign investment. «As a result of the corporate tax cut the real economy will gain 160 million levs ($100.5 million). These funds could create jobs and modernize production and raise companies’ competitiveness,» the government said in a statement. The centrist government of ex-king Simeon Saxe-Coburg has been suffering in opinion polls ahead of elections next year. It lowered personal taxes by 2 percent in all brackets, except for the highest one, which was slashed to 24 percent from 29 percent. The Bulgarian economy, to which the European Commission bestowed the status «capacity to resist competitive pressures» in its annual ’04 report, grew by 5.6 percent in the first half of the year, with full-year growth forecasts set at 5.0-5.3 percent. Velchev said the Cabinet can allow the tax cuts, which have to be approved by Parliament, mainly due to the increased budget revenues, but analysts said they were too modest when compared to the huge budget surplus and the privatization proceeds. «Every tax cut is a move in the right direction – but this one is way too shy,» said Martin Dimitrov, an analyst with the Institute for Market Economics.