The state argues with the given 11.2 billion in aid for 2 years, during which the profits of the companies rose by 100%
Targeting an additional BGN 2 billion for the budget, the official cabinet will impose a one-time additional tax on the excess profits of companies. This is one of the proposed amendments to the Corporate Income Tax Act.
The new texts stipulate that all companies pay an additional 33% if they have excess profits. It will be calculated by comparing the financial result for the second half of this year with the average profit for 2018, 2019, 2020 and 2021. If a company has a 30% higher profit, it will have to pay the new tax.
The Department of Finance Minister Rositsa Velkova argues for its introduction with the aid that the state has given to businesses. They are calculated at over BGN 11 billion for the period 2020-2022 in the form of electricity compensation and tax discounts. During the same period, the declared profits from the business rose by about 100% compared to 2018 and 2019. Dividends distributed to the owners were BGN 21.5 billion for 2020 and BGN 22.4 billion for 2021. Deposits also grew of the companies in the banks.
In the changed socio-political environment, the public interest also suggests that business should be in solidarity by taking on part of the contribution to preserving the stability of the country, especially those who have made significant profits in crisis conditionsRositsa Velkova’s office indicates.
If this additional money was not collected, there was a risk that the budget would end up with an excessive deficit, that there would not be enough money in the state and that the adoption of the euro would be postponed.
Business reacted angrily to the new tax. The chairman of BSK Dobri Mitrev defined it as punishment for the enterprising, and those in the gray sector will not be affected. Who, after such a thing, would want to do business in Bulgaria, asked Mitrev rhetorically.
There is no overtax to compensate for the over-irresponsible over-spending of the MPs’ over-populism. This will slow growth in any case. This is not money waiting in storage to be transferred to some accounts, responded AIKB chairman Vasil Velev. According to him, the planned excess profit tax will harm companies. Instead, he urged the state to cut its own spending.
In addition to doubts about whether such a measure is legal, it is also questioned whether the finance ministry’s calculations are realistic. Of the 412,000 currently operating companies according to NSI data, only 102,000 have announced that they will report a profit for 2022. The data is from a survey by the Executive Agency for the Promotion of Small and Medium Enterprises. They cited the negative impact of high inflation, the political crisis and problems in supply chains as reasons.
Economists and financiers also spoke out against the new taxation.
Last year, the state generously distributed money to businesses. Now he wants to come up with some kind of tax to get them back, which is a bit absurd, believes the economist Georgi Angelov. And he adds that the state wants to take money from everyone – not only from those who received a lot of money from the budget, but also from those who received nothing and managed on their own. Giving to some and taking from others created inequality, he was categorical.
I hope there will never be a solidarity tax in Bulgaria. It is an absolute fabrication and has no economic effect whatsoever. Retroactive taxation of profits is unconstitutional, financier Emil Hersev commented to BNT.
Economist Vladimir Sirkarov also defined the tax as unacceptable. A huge part of the Bulgarian business will be hit, which is absolutely unacceptable. The calculation formula is made so that more companies can fall into this concept of excess profithe declared on Nova TV.
Milen Velchev, ex
Financial Minister:
A one-time tax is not a reasonable solution,
costs must be cut
I have serious doubts as to how one-time taxes are reasonable even from the point of view of their collection. There is also the question of the imprint they leave on the business. I hope that the caretaker government will take a good look at how much revenue it expects from this tax and whether it really needs to be introduced once.
It is far better to rely on cost savings, which in Bulgaria have increased unprecedentedly as a percentage of gross domestic product. In budget finances, the key word is sustainability, and we cannot talk about such with one-time taxes.
Lubomir Datsov,
member of the Fiscal Council:
It would be better if VAT were raised
to 22% – this is how prices will be tamed
If they want to both tame inflation and ensure enough funds in the budget to cover spending, it might be better to scrap all VAT changes and raise the rate to 22%.
Purely economically, this is more neutral to the economy and will simultaneously limit consumption.
Naturally, there are also negatives, because it will also affect consumption, but this will be a desired effect. Inflation, unfortunately, fights this way. If this is done, it will fall to 6-7%.
