Bulgaria Rulers, Opposition Clash over Flat VAT in Tourism

Business » TOURISM | December 14, 2010, Tuesday // 12:06
Bulgaria: Bulgaria Rulers, Opposition Clash over Flat VAT in Tourism Bulgaria's tourism industry has traditionally been the darling of those in power since it is the only one that enjoys a reduced value-added-tax. Photo by BGNES

Bulgaria's ruling party has opposed proposals for a delay in the introduction of a flat 9% value-added tax (VAT) in the tourism sector, scheduled for April 1 next year.

"I don't see why we should delay this move. If we do this in a bid to boost the summer season, tour operators may press the same demands for the winter season as well," commented Menda Stoyanova, head of the budget parliamentary commission.

The statement came in response to a proposal for the introduction of the flat rate after the summer season, tabled to parliament by the right-wing Blue Coalition.

Earlier this month the opposition Socialist Party claimed the European Commission has not threatened with sanctions Bulgaria's government unless it introduces a flat 9% value-added tax (VAT) in the tourism sector next year.

"There is nothing that makes the change in the VAT rate for the tourism sector that urgent," Socialist MEP Kristian Vigenin said, citing a statement of Algirdas Semeta, EU Commissioner for Taxation and Customs Union, Audit and Anti-Fraud.

In response to a question by Kristian Vigenin, Commissioner Semeta confirmed that the European Commission contacted the Bulgarian authorities over the issue in question, but did not mention the country has been threatened by sanctions.

Bulgaria will introduce a flat 9% value-added tax (VAT) in the tourism sector as of the beginning of April next year under amendments that parliament adopted at second reading in the middle of November.

The ruling center-right government of GERB party claimed the introduction of a flat VAT for the tourism sector comes in response to the demand of the European Union that Bulgaria should harmonize tourism VAT, which currently stands at 7% for organized groups and 20% for individual tourism.

It said Bulgaria approached the European Commission (EC) with an inquiry on the possibility to introduce a unified value-added tax (VAT) in the tourism sector from 2012, as proposed by the industry, but the proposal was rejected.

The idea for a flat tourism VAT tax has sparked an outcry from tour operators and hoteliers, who called it "ridiculous" since all contract deals with foreign tour operators for the clients' vacations in Bulgaria in 2011 have already been signed and called for postponing the new tax until 2012.

The government has defended its decision by saying this is not a fiscal measure, but a bid to avoid a sanction by Brussels for not putting on a par the two types of tourism - individual tourism and tourism for organized groups.

Tourism is one of, if not the most important industry for the perennially cash-strapped Bulgaria - it not only provides nearly 10% of the country's GDP, but is also a significant source of foreign currency and jobs. The industry has also been traditionally the favorite sector of those in power - it is the only one that enjoys a reduced value-added-tax.

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Tags: Algirdas Semeta, Socialist, value-added tax, Bulgaria, VAT, tourism, European Union, center-right government, European Commission

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