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Bulgaria's Deputy Prime Minister and Finance Minister, Simeon Djankov, confirmed Thursday that the cabinet plans to lower the Value Added Tax, VAT, with 1%-2% by 2013.
Speaking in an end-of-year interview for the largest private TV channel bTV, Djankov announced the intention to reduce VAT had been written in the program of the ruling, center-right Citizens for European Development of Bulgaria party, GERB, and would be implemented by the end of their current term in office. He reiterated that the cabinet would go ahead with this step without any warning in order to avoid a shrinking demand over expectations for lower VAT.
"This will automatically reduce inflation by the same percentage as VAT's decrease and do the same for Bulgarians' purchasing power. It would not lead to a budget gap, because in 2011 we collected BGN 1.5 B more in revenues, compared to 2010," the Minister explained.
For 2012, Djankov issued a "pessimistic forecast of 1% economic growth and an optimistic one of 2.5%." He promised that 2012 will be better than 2011, 2010, and 2009, reminding the minimum monthly wage and minimum retirement pensions will go up.
"There will be more money. Why are people pessimistic? Because in the last three months only negative news came from Europe, not only from Greece...They wasted two years and finally made a decision our cabinet sees as the right one. Seven economies are suffering secondary recession, but, at least, the future is clearer compared to a month, a month and a half ago," the Minister told the TV host.
Djankov did not miss to reiterate his pride from the fact everyone considers Bulgaria an island of financial stability, but stressed one must still build on it because this is the only way to avoid poverty and misery. According to him, precisely financial stability would give the opportunity to lower VAT, increase wages etc. The Minister also pointed out that regardless of the seemingly very difficult situation, one should remember that Bulgaria joined EU as the poorest country and now has an economic growth higher than Europe's average.
The Minister said he was proud with the success the cabinet managed to achieve with reforms in the heavily-indebted State Railways BDZ, and in the retirement system with the increase of retirement age, effective next year. He underlined that the next cabinets would benefit from the latter over the reduction of the budget gap at the National Social Security Institute, NOI.
Djankov announced forthcoming reforms in education and scientific research, which would get more funding, but pointed out once again the entire system in these sectors must be changed.
He voiced hope for a partial reform in the health care sector. According to him, money for medications for cancer patients has been increased by 30%, but it has also been transferred from the Health Ministry to the National Health Insurance Fund, NZOK, while money for cancer treatment remains unchanged.
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