Parliament’s budget committee on May 20 accepted the proposals of the ruling coalition partners GERB and the United Patriots to reduce VAT to 9% for the restaurant industry and for books. There will also be tourism vouchers for police and medical professionals working in the front lines in the battle with the coronavirus. The vouchers will be for use at state-owned recreation facilities.
The meeting of the committee took place in the absence of its chair Menda Stoyanova and the Minister of Finance Vladislav Goranov, who are against the VAT reduction.
The finance ministry has presented estimates that if all ideas for reducing VAT are adopted, the losses to the budget could reach over 1 billion and 700 million BGN.
Ideas to reduce VAT have sparked political clashes in the budget committee.
Rumen Gechev of the opposition Bulgarian Socialist Party: It became clear from the discussions that there is a great rift in GERB. Open opposition between the Prime Minister, the Minister of Finance, the group is divided, and someone will have to leave, because the Prime Minister is a very serious politician, he said that whoever does not agree with the 9% VAT rate, should go. I someone will go. Whether it will be all together or just one minister, I do not know.
A week ago, the Prime Minister said the Finance Minister had concerns about the possible reduction in the VAT, but he did not take this into account.
Boyko Borissov, Prime Minister: I have full confidence in him, but he is not my boss, I am his boss. Whoever does not agree, he should leave, resign and go on.
In an opinion presented to the MPs, the Ministry of Finance described its concerns about the reduction of the VAT, which according to them, if reduced for restaurants and books, would result in losses to the size of 163 million BGN. The ideas of the MRF for lower VAT for goods for children up to 3 years old, and the BSP’s proposal for reduced VAT for food and medicine paid by the health insurance fund were rejected. There will be no VAT reduction for tourist and fitness services.
According to Vladislav Goranov's ministry, if all these ideas are approved, the losses to the budget will total more than 1 billion and 760 million BGN, and it may be necessary to raise VAT to 24% and corporate tax to 17-18%. According to the MRF, the tax cut should have taken place after a long and deliberate debate.
Yordan Tsonev, MRF: If I were in his place, I would be extremely critical and make a big noise about it. It is the job of a finance minister to secure the fisc, not to provide businesses with tax discounts.
The restaurant industry is pleased with the changes.
Richard Alibegov, Chair of the Bulgarian Association of Restaurants: We propose raising the minimum wage for the industry from 610 to 800 BGN at the time the new VAT rate is introduced. This difference will cover a large part of the estimated loss.
By reducing the VAT, a greater revenue collection rate will be achieved.
The changes will be presented in the plenary on Friday.