Банкеръ Weekly



Many people may find it hard to believe that in Bulgaria there are citizens who hold more than BGN100,000 in their bank accounts. This is what the statistics of the Bulgarian National Bank (BNB) shows as of June 30, 2003. According to the official information, there are 5,072 bank deposits of individuals in Bulgarian and foreign currency that exceed BGN50,000 each. The aggregate amount in these deposits is BGN561MN. This seems strange, considering the fact that the interests on deposits are too low - about 6% for a 1-year deposit, and up to 4.5% - for a longer period of time. Such yields would not be a temptation to the more affluent people, as the money could bring them much higher profits if they invest it in construction or trade deals.Bankers claim that people who have big deposits actually use them to secure the loans they draw in order to acquire real estates, which are either leased out or resold at a profit. The scheme is lucrative, because banks require a lower interest for a loan secured by cash (between 7%-8%), while interests on mortgage credits reach 12.75 per cent. Then, after paying off the loan, the customer keeps the money on his deposits and gets additional income from the acquired real estate or resells it.Judging from BNB's statistics, the banks are quite generous to their richer clients. Some Bulgarian banks finance certain people with credits of over BGN500,000. The names of these prosperous and reliable people are secret and bank managers consider revealing them almost a crime. Therefore, we can still talk about figures instead of names. Twenty seven such megaloans were launched by mid-2003. Their total amount exceeds BGN24.7MN, which makes BGN915,000 for a credit on the average. It's curious what kind of monthly income a man should have in order to be able to service such a loan. Even if it is payable in 20 years, a loan of that kind would swallow BGN6,000-7,000 for redemption each month. Such expenses can be hardly afforded by someone with an annual income below BGN120,000. These people are numerous in Bulgaria. Still, how many of them declare their income and pay due taxes to the budget? There are many affluent people, too - lawyers, financiers, businessmen, who are either well acquainted with the tax legislation in Bulgaria or have reliable consultants. Despite declaring their high income, they manage to legally avoid the payment of big taxes. To put it short, people with huge income in Bulgaria can get huge credits but do not pay huge taxes.

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