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Bulgaria Mulls Personal Tax Rate Hike

Date: 21.06.2010

Bulgaria’s government recently scrapped its plans for a VAT increase in a bid to plug a budget gap that has thwarted the new EU member's efforts to join the euro in the near future, but now a hike in the personal tax rate is looming.

“It is very likely that Bulgarians will have to say goodbye to the flat tax,” Menda Stoyanova, head of the parliamentary budget commission, said over the weekend.

This is the first time that a high-ranking representative of the ruling center-right GERB party admits a personal tax hike is on the agenda, even though speculations about a possible increase have been going on for months.

Bulgaria has the lowest personal and corporate income tax in the EU at 10 %, which was introduced at the beginning of 2008, replacing the previous system, which combined several different tax rates - between 20 and 24 %, depending on income.

Bulgaria, with a 10 % flat rate, sill has the lowest personal tax rate among European Union member states, shows a survey of consultancy and audit company KPMG International.

Bulgaria also has the lowest social security rates, which coupled with a 10% flat rate, makes it very attractive for physical entities, employers and potential investors, KPMG comment.

The highest personal income taxes in the world are still paid by the citizens of the European Union (EU), the survey shows.

But with the introduction of flat rate taxes in a number of Eastern European countries - including Latvia and Poland, which reduced their top rates to 23 and 32 % respectively for 2009 - average rates have fallen from 41.1 % in 2003 to 36 % in 2009.

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