ECONOMY

Bulgaria makes no tax changes

SOFIA (Reuters) – The Bulgarian government made no changes to key corporate and income tax levels for next year in draft laws approved yesterday, which aim to bring the Black Sea state’s regulation in line with the European Union. Government officials said a possible tax cut was still on the cards later in the year following discussions with economic mentor the International Monetary Fund and more data on incoming revenue. «We need more data to see the impact of social security payments’ cut on revenue. We also need to know what is on the expenditure side of the 2007 budget to decide what tax policies we need,» Deputy Finance Minister Georgi Kadiev told Reuters. Earlier this year, the Socialist-led government said it planned to cut corporate taxes to 12 percent from the current 15 percent, raise minimum non-taxable income to 200 levs (101.70 euros), from 180 now, and simplify the bracket income tax system to raise low living standards and boost investment. Kadiev said the Finance Ministry needed more time to see how revenues are coming in after it cut the social security burden by six percentage points to 36.6 percent before deciding on taxes. Bulgaria will also be able to plan budget spending next year better after the European Commission makes its recommendation in September whether it should join the bloc in 2007 or 2008. Sofia has calculated that if it enters the EU next year, the cost of co-financing EU-backed projects will amount to 2.1 percent of gross domestic product in 2007 and its contribution to the EU budget will be 1.2 percent of GDP. The Finance Ministry is expected to make its final proposal on the level of corporate and income taxes and on social security payments – that may also be cut by two percentage points – during parliamentary discussions about the 2007 draft budget in the fall. It will also need to agree the planned level of next year’s fiscal surplus with the IMF. Bulgaria’s ruling coalition has said it would seek a fiscal surplus of 0.8 percent of GDP next year, while the IMF has advised a 2 percent surplus, still a step toward loosening from the hefty surplus of 3 percent agreed for this year.