Bulgaria faces criminal procedure for VAT gifts
Bulgaria could be involved in criminal procedure for violation of European law due to two measures, advertised by the government as anti-crisis ones.
It goes about the VAT reductions in the tourism industry which were approved on Wednesday by the Committee on Budget and Finance.
The Commission approved the rate reduction launched by the ruling majority for tour operators as well as for wine and beer in restaurants.
"There was such a proposal some time ago, we did not accept it because it contradicted the directive, which prohibits reducing the rate on the margin of tour operators. It continues to contradict even now and I assume a criminal procedure will be launched. We’ll see." Menda Stoyanova, the chairwoman of the budget committee, who has been consistently opposing all tax gifts for the tourism industry, explained.
Former Deputy Minister of Finance Lyudmila Elkova said that a criminal procedure is pending, as the VAT reduction on beer and wine is contrary to the European directive on alcohol. "The annex to the European directive indicating which rates may be reduced, states that this refers to food and beverages with the exception of alcoholic drinks, which is a principle, "Elkova pointed out.
Second batch of discounts
Value added tax is extremely important as it provides over 40% of tax revenues in the country's budget. Despite this, from July 1, the reduced rate of value added tax of 9% started to be applied to books, restaurants and catering services, baby food and diapers. The nine percent rate is temporary and will be in effect until December 31, 2021.
The main reproach towards these measures is that the prices for Bulgarian citizens will not go down and there will be a certain budget loss. Exactly how much will the state treasury be damaged is about to become clear in the autumn after the preparation of next year’s financial framework.
Implications on the treasury
However, the crisis is beginning to affect treasury revenues. Tax and non-tax revenues under the consolidated fiscal program by May 2020 have shrunk by BGN 1.463 billion. Tax revenues and revenues from social security contributions have decreased by BGN 416 million per year. VAT revenues are BGN 3.728 billion with BGN 70 million less.
Under the former Minister Vladislav Goranov, the Finance Ministry calculated that the lower tax for restaurateurs will cost the budget BGN 150 million. Prime Minister Boyko Borissov's argument for these moves was that they were the result of a political decision.