Golden Raspberry award* for interest tax
Ex-Finance Minister Dyankov had gaped to gobble everything "unnecessary" for citizens and businesses. His heirs were left with a mouth wide open.
The ludicrous BGN 6 million of interest tax was collected by the end of November this year. Almost double the amount of BGN 11 million was received from the shameful tax in 2018. This was reported to the BANKER exclusively by the Finance Ministry. This amount is somewhat of a record tax history. According to observers, the executive and parliament authorities deserve the Golden Raspberry Award first for voting and then for supporting the existence of this tax for years.
Interest tax revenue, which was introduced through controversial legal changes in January 2013, has been decreasing in each subsequent year since January 2013, the Ministry of Finance data show. In 2013, from this tax, the treasury got BGN 82.4 million, in 2014 revenues declined to BGN 65.7 million, and in 2015 - to BGN 52 million. In the following years up to now the drop continues but there are no official figures for that.
We subtly remind you that in recent years deposit interest rates have plunged dramatically, and the tax on deposits interest has been twisted several times. The financial guru of the first GERB government, Simeon Dyankov, introduced the 10% rate on January 1, 2013, with changes to the Taxation Act for Individuals (CITA). Then he boldly announced he anticipated the new tax revenue to be over 120 million levs a year.
Given that these expectations fell short, it was decided at the end of 2013 to reduce the rate by 2% each year. With such a plan, the tax must have reached zero for five years.
At the end of September 2014, the then finance minister of Oresharski cabinet, Petar Chobanov, proposed to the Parliament to retain the tax, which was 8% at that time. That is why in 2015, the tax rate anchored at this level and has been kept that way to this very day. And the income from term deposits is now subject to taxation.
A year ago, BANKER made a survey among deputies whether they would support the initiative to abolish that scandalous interest tax. The idea of annulment is mostly understood by members of parliament with profound economic knowledge and concern for the will of the electorate. But nothing followed.
Is the poor financial expertise of the population to blame for our "tax" apathy? Or is it the fatigue of our endless transition?
That is the reason no one bothers to take to the streets or raise a voice in the Parliament to demand a tax cut ... There is no other way to explain why we are observing quietly and timidly the steadily increasing budget surplus, we are trying to predict how it will be "scattered" by the government to various items and initiatives behind the back of parliament and we can’t remember that in the civilized world the situation leads to tax cuts. It's so simple - they levy taxes above the plan - so they take more than necessary, that is, it is high time they reduced taxes in order to return the overpayments to people and businesses. This is vital because with this money their consumption will be increased, the businesses will enliven and thus more tax money will be paid tomorrow and higher growth will be realized. This is mostly true for interest tax.
The purportedly serious revenue source for the coffers interest tax has "gone down the drain". The Treasury admits that the tax on deposits interest has failed to meet the expectations. The anticipations of Simeon Djankov, of his student and follower Goranov, of known and unknown politicians and MPs - fiscalists, have evidently turned out to be wrong.
Thrift goes forward and upward. In the days when Djankov introduced this tax, the “BANKER” warned that banks would invent "hybrid" investment instruments which would be outside the scope of the term "deposit". So it came true. The more serious argument for terminating this tax is the poor revenue from it, the high costs needed to administer it. The tax makes it complicated for the banks and ultimately turns out to be pointless.
But it's cool to take off the last shirt from the back of the miserable depositor.
* The Golden Raspberry Awards (also known in short terms as Razzies and Razzie Awards) is a parody award show honoring the worst of cinematic under-achievements. Founded by UCLA film graduate and film industry veteran John J. B. Wilson, the Razzie Awards' satirical annual ceremony has preceded its polar opposite, the coveted Academy Awards, for four decades. Its first ceremony was held in March, 1981.