Bulgaria’s Finance Ministry will propose Budget 2023 with a 3% Deficit, Tax Changes and Spending Cuts

Business » FINANCE | March 15, 2023, Wednesday // 19:17
Bulgaria: Bulgaria’s Finance Ministry will propose Budget 2023 with a 3% Deficit, Tax Changes and Spending Cuts @BGNES

The Ministry of Finance is preparing a draft Budget 2023 with a deficit of 3%, tax changes and cutting some expenses. This became clear at a briefing by Acting Finance Minister Rositsa Velkova.

The project provides for:

  • the introduction of the so-called "excess profit tax" - a one-time joint contribution for the second half of 2023
  • 100% dividend from all public enterprises after deduction of accounting loss
  • increase in toll fees and concession fees
  • recovery of some of the reduced VAT rates. Lower VAT is expected to remain only for bread, flour, baby food and books
  • increasing the excise duty on e-cigarettes, this concerns so-called vapes, not for heated tobacco
  • VAT declaration for registered risk goods
  • limitation of business trips, entertainment and living expenses

The implementation of these measures will guarantee the implementation of the Swiss rule on indexation of pensions, the payment of increased salaries, as well as an increase in salaries in the budget sector, but only to the institutions that did not increase salaries in 2022, said Finance Minister Rositsa Velkova.

She commented that theoretically there is a danger of the currency board falling if the deficits in the state become excessively high. The goal of the draft budget prepared by the government is to limit the deficit to 3%.

"If the deficit is increased above 3%, we will not meet the deficit criterion. This means that we must have a higher debt, which in turn means it will be more difficult to raise liquidity on the international capital markets. Because with a higher deficit and losing the prospect of entry into the Eurozone, international investors would not have yielded the kind of yield we had in, say, the January issue this year. Volume may not be raised. And provided that debt cannot be raised, it is possible to resort to a loan from the International Monetary Fund," Velkova pointed out.

Velkova denied that the measures contain specific recommendations to the ministries to cut 20% of their expenses. Earlier, publications appeared, according to which acting Finance Minister Rositsa Velkova asked all her fellow ministers to reduce their spending by 20% because of the risk to the budget.

"There is no debate about 20%, because a 90% buffer is being discussed, which means a 10% cost limitation, and only in the fourth quarter, and with a possible increased balance. This means that if the costs stick to the planned, there will be no limitation," she explained.

According to the calculations of the Ministry of Finance, the measures will bring in over BGN 6 billion to the budget.

The measures, together with the draft Budget 2023, will be proposed for discussion at the 49th National Assembly, with the final decision resting with the Parliament.

The proposed changes to the tax laws will be published on March 17. On April 3, the Ministry of Finance will present the draft budget for public discussion and coordination procedures with the National Council for Tripartite Cooperation will begin. The goal is for the draft Budget 2023 to be considered by the Council of Ministers on April 26 and to be submitted to the National Assembly within the legally established deadline.

The concept for the draft Budget 2023 was adopted in the form of a protocol decision at today's meeting of the Council of Ministers.

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Tags: budget, velkova, deficit, tax

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