ECONOMY

Corporate tax cut

SOFIA (Reuters) – Bulgaria’s parliament agreed yesterday to cut corporate taxes to one of the lowest levels in Europe as it tries to boost economic growth ahead of EU entry next year. The 240-seat chamber voted unanimously to cut corporate income taxes to 10 percent in 2007, from 15 percent now, in a second and final reading, a parliamentary press officer said. The proposal is part of a wider corporate tax law expected to be discussed and approved in its entirety by next week. Deputy Finance Minister Georgi Kadiev said the cut would cut tax income by around 290 million levs ($185.9 million) – or just over half a percent of GDP – but the low rate would also cut tax evasion and improve collection. «The 10 percent corporate tax makes evasion pointless. A large part of businesses in the gray economy will come into the light,» he was quoted as saying by news agency BTA. The move is not expected to threaten Sofia’s plan for a budget surplus of 2.0 percent of GDP in 2007, and will let Bulgaria match Cyprus with the lowest EU corporate tax rate once it joins on January 1. It also follows steps by ex-communist newcomers Slovakia, Hungary and Estonia – Tallinn offers zero-percent taxes on reinvested profits but 23 percent on other earnings – to cut corporate taxes below levels in older EU members and boost foreign investment and economic growth. Earlier this month, Bulgaria’s Socialist-led government also agreed to cut social security payments, which are shared by firms and employees, by 3 percentage points to 33.6 percent of gross wages and hike public wages by 10 percent next July. Minimum non-taxable income will rise to 200 levs a month, from 180 now, but personal income tax brackets will remain unchanged. The Black Sea country of 7.8 million people is striving to improve its image and break down bureaucratic barriers so it can attract more investment, which is seen as its best guarantor to closing the wide gap between it and the richer EU members. (Reuters)