Bulgaria Will Not Change 10 Percent Tax Rate

May 5, 2011 Taxation in Bulgaria

 Prime Minister Boyko BorisovThe Prime Minister of Bulgaria has stated that the country will not see a change in its corporate tax rate or economic decision making processes as a result of joining the Euro Plus Pact.

While speaking to the parliament of Bulgaria on May 4th, Prime Minister Boyko Borisov defended his party’s intention for the country to join the Euro Plus Pact, saying that the move is beneficial for the country and will not lead to Bulgaria loosing decision making power over its economic and taxation policies. The speech was made in response to a recent decision of the Budgetary Committee to vote against Bulgaria’s support for the Pact. In an effort to sway parliament, the Prime Minister said, “…development of Bulgaria could not happen without support [ by Bulgaria] for the Euro Plus Pact.”

The Euro Plus Pact was conjointly proposed by the German Chancellor Angela Merkel and French President Nicolas Sarkozy in February 2011, and it was initially labeled as the European Competitiveness Pact. Originally the project called for a common base for corporate taxation among EU member states, along with plans to raise pension ages, abolish of wage indexation, and place limits on the size of sovereign debt allowed for governments. Through months of debates, the original proposal was updated to revolve around five goals, consisting of fostering economic competitiveness, raising employment levels, enforcing financial stability, improving the sustainability of public finances, and international tax policy coordination.

Opposition parties in the Bulgarian parliament have stood up against the Bulgarian government’s decision to join the Euro Plus Pact, claiming that it will force the country to alter its tax system, instate economic policies that are not best suited to the national financial climate, and also force the country to assume some extra responsibility for funding and bailouts of struggling EU member countries. While speaking in parliament, the Prime Minister addressed these concerns, reassuring MPs that the targets raised by the Euro Plus Pact are non-binding and will not require an increase to Bulgaria’s 10 percent corporate tax rate, the lowest in the EU at the moment. The Pact will also have no sovereignty in determining or setting the country’s policy regarding public sector wage increases or salary freezes. While speaking on the prospect of funding bailouts of other Pact members, he said, “…it is crucial to know that Bulgaria is not assuming guarantees for others’ [countries] debts.”

Photo by europeanpeoplesparty