Bulgaria's Rulers Ok Deposit Tax to Punish 'Lazy Savers'
Bulgaria's parliament approved at first reading on Thursday the government's controversial proposal to levy a 10% tax on interest earned from bank deposits.
"This tax aims to bring to justice those lazy people who rely on the money stashed in banks," GERB MP and chairman of the parliamentary group of the ruling party Krassimir Velchev commented from the parliamentary rostrum.
"The current system favors the banks and the people who do not want to work. If we continue to let them live like that undisturbed, nothing good is in the cards for us, " said Velchev.
The ruling party argued that the new levy just extends Bulgaria's flat rate tax base, but declined to present any figures about the positive impact the measure will bring.
Nor was there any debate over concerns that the new tax may shake the bank system foundations due to capital outflow.
A proposal to introduce a tax-free threshold was rejected.
The opposition critized the new tax, saying it will do more harm than good to the budget – fewer savings will reduce investments and opportunitites for economic growth.
Bulgaria's Finance Minister Simeon Djankov, who initiated the proposal, did not attend the parliamentary session.
The new 10% levy on people's income on their bank deposits is expected to 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.
Both 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.
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Interest on bank deposits should be declared on individuals tax returns and taxed at a higher rate (say 15%). This way this meets the governments aims to make "lazy savers" pay, it also takes care of any foreign nationals who pay tax to their native country having to pay the tax (I understand the taxing of foreigners is not part of the governments plan). It also takes the onus (and the cost) away from the banks.