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Bulgaria will remain the country offering the lowest tax rates in Europe
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Bulgaria’s Finance Ministry has amended its forecast for a 2% decline of the economy in 2010 switching to expecting a 0,3% GDP growth.
This forecast has been included in the Ministry’s Convergence Program for the period 2009-2012, which is to be submitted to the EU. The Convergence Program includes the parameters of the country’s fiscal policy in accordance with the recommendations of the Stability and Growth Pact, the Lisbon Treaty, and the Maastricht Criteria for accession to the Eurozone.
Djankov has pointed out that the government is committed to maintaining a balanced budget in 2010-2011. In his words, this is crucial for the country’s accession to the ERM 2, the final step before the adoption of the euro. He promised that the cabinet was going to reduce the taxes if the balanced budget policies prove to be successful.
“Our latest analyses show that thanks to our stable fiscal policies, and some of our other anti-crisis measures, especially combating contraband, we can now forecast an economic growth of 0,3%,” Djankov explained.
He added that the optimistic scenario was for a growth of 1%, whereas the pessimistic one was the same the forecast written down in the 2010 State Budget Act – a 2% decline. He predicted, however, that Bulgaria’s GDP was probably going to go up by BGN 3-4 B in 2010.
“Bulgaria is the only EU state with increased perspectives from the international credit rating agencies. If there is no deficit, it won’t be necessary to raise the taxes. Our excellent fiscal policies give us the chance to attract more foreign investments in the next three years,” Djankov said Wednesday after the weekly cabinet meeting.
The Convergence Program of the Finance Ministry includes the reform steps to be made by the Borisov government in the next three years in order to help Bulgaria catch up economically with the wealthy EU states.
It also accounts for the reforms carried out by the Borisov cabinet in the last months, and makes a commitment to preserve the currency peg until Bulgaria adopts the euro.
“Our goal is to make Bulgaria an average EU nation as far as the income levels are concerned. My ambition is to make Bulgaria the country with the lowest taxes in the EU by the end of our term,” the Finance Minister declared.
He made it clear that in February and March of 2010 the government was deliberately going to have monthly budget deficits in order to make some state expenditures which were not executed by the previous cabinet. Yet, by the end of 2010 it is going to strive to achieve a balanced budget.
“We are striding at the fastest possible pace towards the ERM 2 and the Eurozone. In my view as the Finance Minister, there is no doubt that the best policies for Bulgaria is the swiftest possible accession to the Eurozone. There is a lot of work to be done from a political point of view. Bulgaria’s entry to the Eurozone must not be tied to what is happening in our neighboring countries, we have done enough by meeting Maastricht criteria,” Djankov said adding he had asked the business circles and NGOs to help Bulgaria achieve its top foreign policy priority – adopting the euro.
The Convergence Program of the Finance Ministry envisages a total of 16 larger reforms including in the healthcare sector, in education, and the social sphere. The government is going to reduce gradually the interest payments in order to bring them below 1% of the GDP. The state guaranteed debt is also expected to decline further by reaching under 2% of the GDP.
Djankov has stated that he expected to be able to reduce the value-added tax by 2% - down to 18% - with the 2011 state budget, and then by another 2% the following year.
The other taxes will remain at their present level; only the social security payments will be reduced by 5% by the end of the government’s term in 2013. Thus, according to the Finance Minister, Bulgaria is going to become the country with the lowest taxes in the EU.
He also announced that preliminary data showed that the National Revenue Agency ended 2009 with BGN 228 M more than it raised in 2008.
“I think that we are yet to see the really big advantages of the reforms in the NRA and the Customs Agency in the coming six months,” the Minister said.
He also pointed out that Bulgaria’s glass-making, food, and chemical industries were registering growth, and that the country’s export would probably be on the rise soon as a result of that.
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