Bulgaria Govt: Banks to Collect Tax on Deposits Income

Banks in Bulgaria will automatically collect the tax on people's income on their bank deposits through new software, the government has decided.

The new 10% levy on people's income on their bank deposits will come into force from next year.

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 finance ministry has suggested.

Economists and the central bank have slammed 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 said 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 the past half year, official data shows.

There has been recently a noticeable trend among Greek and Romanian citizens and businesses, who prefer to open deposit accounts in Bulgarian banks, bankers have commented.

The Bulgarian banks stability and their more attractive interest rate policy are the main reasons for the interest of Greek and Romanian citizens and companies, according to the bankers.

Meanwhile a survey has shown that over the last five years only 45% of Bulgaria's population disposed of sufficient incomes to be able to put aside regular savings, predominantly small sums of BGN 100 per month.

An analysis by Bulgaria's biggest bank UniCredit Bulbank showed an interesting trend – in times of crisis people with larger deposits tend to increase the amounts in the bank accounts, while those with smaller savings have them downloaded.

Moreover, it appeared that over two thirds of the money deposited in banks are in the hands of just 5% of the households in the country.