ECONOMY

Sofia to cut corporate tax to 10 pct in 2007

SOFIA (Reuters) – Bulgaria’s government is set to cut corporate tax to one of the lowest levels in the European Union to boost economic growth when it joins the bloc next year, a ruling party official said. Yordan Tsonev, deputy leader of the junior ruling MRF party said the Socialist-led coalition would agree next week to cut corporate tax to 10 percent in 2007, from 15 percent now. It will also sanction a three-percentage-point cut, to 33.6 percent, in social security payments by both workers and companies on workers’ wages. «Corporate tax will be cut to an unprecedented 10 percent. By doing this, we hope to become the most attractive place for investment in Europe,» Tsonev told Reuters. «This decision will most likely to be made official by the coalition council very soon – early next week.» The coalition members have also agreed to hike public sector wages by 10 percent as of next July, which is also when the easing of the social security burden will take place, he said. The decision will open the way for Parliament to finally approve 2007 tax laws and help the Finance Ministry to apply the final touches to next year’s budget draft, which should be lodged in Parliament by the end of October. The moves are aimed at lifting disposable incomes and helping Bulgarians catch up with EU living standards. With average monthly pay of just 160 euros, they will become the poorest EU citizens upon membership next year. Minimum non-taxable income will also rise to 200 levs, from 180 now, but there will be no changes in the bracket system of the income tax, Tsonev said. But he said further cuts would be difficult. «The whole package actually exhausts the means for further cuts in direct taxes,» he said. «We are convinced that there is a potential in the economy for the cuts, that its competitiveness depends on them, and that incomes are linked to economic growth, not to inflationary financing by the budget,» Tsonev said.