Bulgaria Banks Offer Ways to Cushion Deposit Tax Blow
A pedestrian passes an office of UniCredit Bulbank in Sofia. UniCredit Bulbank is the biggest bank in Bulgaria. Photo by BGNES
Bulgarian banks are already offering customers roundabout services to cushion the impact of the new 10% levy on people's bank deposits income, which came into force as of January 1.
Saving accounts, payment accounts, termless deposits, mixed deposits and investments funds feature among the legal alternatives banks offer so that this tax can be reduced or avoided.
Levon Hampartzoumian, CEO of UniCredit Bulbank commented recently that if, for example, the client is obliged to bring in the budget 10%, the bank may offer an alternative that will cost him only 2%.
Hampartzoumian vehemently rejected the government's argument the new levy will force richer people with huge bank deposits to pay tax on that income, hinting the move is pure pre-election gambit.
"Who are those rich people? Those, who fill up the columns of lifestyle magazines and show off their flashy lifestyle because they live on credit? Or those, who have long ceased to pay taxes because they have transferred all their money to some sunny island?"
A new and controversial 10% levy on people's interest earned from bank deposits comes into force in Bulgaria from January 1, 2013.
Bulgarians will be obliged to include the income on bank deposits in their tax declarations a year later – in 2014 – after the taxation process is streamlined.
The banks will be responsible for declaring the tax while only those who file written declarations with the National Revenue Agency, NRA, will be mandated to file declarations on tax from deposits. Taxation on interest earned from deposits will be done at the time it is paid, even if the account was opened in 2013.
The tax was proposed by Finance Minister, Simeon Djankov and slammed by the opposition, who voiced concerns that the new tax will affect mainly people with small savings and retirees.
Economists and the central bank have also opposed the government's decision to introduce a 10% tax on bank deposit income, saying this would dent people's savings and shake the bank system foundations due to capital outflow.
The government says the new tax aims to raise BGN 120 M and force richer people to pay taxes on the income they earn from bank deposits.
Banks in Bulgaria continue to record steady growth in savings, a trend which has been gaining momentum throughout last year, but breakdowns show that the increase is due to mainly companies and only slim percent of the private savers.
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