Bulgarian Socialists to Gradually Eradicate Deposit Tax
The 10% levy on people's interest earned from bank deposits will be gradually reduced by 2% a year to be eliminated by the end of the four-year term of the current Bulgarian government.
The proposal will be made between the first and second reading of the draft budget for next year.
According to the latest information, in 2014 the deposit tax will be 8%, instead of 10%.
This is an U-turn from announcements at the end of September that Bulgaria's Socialist-led government has given up on plans to annul the tax that it initially slammed as "unfair."
The tax was proposed at the end of last year by former Finance Minister in the Cabinet of the Citizens for European Development of Bulgaria party, GERB, Simeon Djankov, and was slammed by the then opposition, including BSP, who voiced concerns that the new tax will affect mainly people with small savings and retirees.
The controversial 10% levy on interest earned from bank deposits came into force in Bulgaria on January 1, 2013.
It obliges Bulgarians to include the income on bank deposits in their tax declarations a year later – in 2014 – after the taxation process is streamlined.
The so-called termless deposits, saving accounts, child savings and current accounts are not taxed.
The banks are 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 is done at the time it is paid, even if the account was opened in 2013.
Economists and the central bank opposed the 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 GERB government insisted the new tax aims to raise BGN 120 M and force richer people to pay taxes on the income they earn from bank deposits.
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