Sofia to adopt flat 10 pct income tax in 2008

SOFIA (Reuters) – Bulgaria plans to introduce a flat income tax of 10 percent next year – one of the lowest in the European Union – in an attempt to boost low living standards, the government said yesterday. The Socialist-led government voted for the flat rate which will abolish the current four-bracket tax system, after it cut the corporate tax to 10 percent this year to boost economic growth and reduce significantly grey economy. The cabinet also decided to cut the dividend tax to 5 from current 7 percent, but keep the value added tax at its current rate of 20 percent. The changes are pending parliamentary approval. The trade unions have protested against the flat income tax, saying it would hit the poorest and further cut their low incomes as the new rate does not envisage a non-taxable amount. Non-taxable income is currently set at 200 levs ($149.7). The cabinet pledged to compensate the public workers whose salaries would be decreased because of the flat tax. It has been under strong pressure to significantly hike wages which average 220 euros ($322) per month.