Bulgaria Introduces Flat 9% Value-Added Tax in Tourism April 2011
The ruling majority in Bulgaria's Parliament has voted down a proposal for a several-month delay in the introduction of a flat 9% value-added tax (VAT) in the tourism sector.
Bulgaria will introduce a flat 9% value-added tax (VAT) in the tourism sector as of the beginning of April this year under amendments that Parliament adopted conclusively on Wednesday.
The right-wing Blue Coalition had insisted that the flat rate be introduced as of October after the summer season, saying that in times of crisis the sectors are very sensitive to tax hikes.
“The increase in the VAT tax for the tourism sector will rake in additional revenues just enough to fund two or three governmental visits abroad,” the leader of the coalition Martin Dimitrov said from the parliamentary rostrum.
He argued that the European Commission has not threatened with sanctions Bulgaria's government unless it introduces a flat 9% value-added tax (VAT) in the tourism sector next year.
"There is nothing that makes the change in the VAT rate for the tourism sector that urgent, there is no deadline that the European Commission has set," he said.
The ruling center-right government of GERB party claims the introduction of a flat VAT for the tourism sector comes in response to the demand of the European Union that Bulgaria should harmonize tourism VAT, which currently stands at 7% for organized groups and 20% for individual tourism.
It said Bulgaria approached the European Commission (EC) with an inquiry on the possibility to introduce a unified value-added tax (VAT) in the tourism sector from 2012, as proposed by the industry, but the proposal was rejected.
The idea for a flat tourism VAT tax has sparked an outcry from tour operators and hoteliers, who called it "ridiculous" since all contract deals with foreign tour operators for the clients' vacations in Bulgaria in 2011 have already been signed and called for postponing the new tax until 2012.
The government has defended its decision by saying this is not a fiscal measure, but a bid to avoid a sanction by Brussels for not putting on a par the two types of tourism - individual tourism and tourism for organized groups.
Tourism is one of, if not the most important industry for the perennially cash-strapped Bulgaria - it not only provides nearly 10% of the country's GDP, but is also a significant source of foreign currency and jobs. The industry has also been traditionally the favorite sector of those in power - it is the only one that enjoys a reduced value-added-tax.
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