Bulgaria’s GERB party, tipped to win the most votes in next month’s election, has said it plans to allow local governments to collect personal income tax of up to 2% if it comes to power.

Currently, Bulgarians pay flat income tax rate of 10% collected by the National Revenue Agency and channeled into the central government budget.

Presenting its election programme for October 5 snap vote on Thursday, GERB said the proposal aims to boost fiscal decentralisation and help municipal authorities raise additional funds for pursuing their own economic policies while the central government will keep unchanged the current flat rate of 10%.

Vladislav Goranov, a former deputy finance minister in GERB’s government (2009-2013) and a GERB nominee for member of next Parliament, told reporters that local governments would be able to set additional tax on personal incomes varying from zero to 2% that would enter municipal budgets.

A range for the proposed additional income tax, however, is not mentioned in GERB’s election programme.

According to Goranov, the idea is to let local governments choose whether to stick to the 10% flat income tax to attract investment to their municipalities, or collect more money, for example in cities with low unemployment rates. With Bulgaria facing local elections next year, introducing additional income tax of up to 2% will be just an option for local governments.

The idea is somewhat different from what the National Association of Municipalities in Bulgaria has called for.

Trud daily quoted Emil Savov, deputy executive director of the association, as saying it has always insisted the central government gave one-fifth of collected personal income tax revenue directly to local governments. While GERB’s proposal is yet to be discussed, it is better to avoid raising personal income tax, Savov opined.

Introduction of the proposed tax hike will face several hurdles, including inconsistencies in Bulgarian taxpayers’ address registration, dnevnik.bg commented.

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