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Tax burden will most likely exceed 40% of GDP in 2006.
submited on 08.08.2006 in category Political stability | Fiscal affairs | Macroeconomic developments
submited on 08.08.2006 in category Political stability | Fiscal affairs | Macroeconomic developments
Budget surplus will again question the political goal of attaining a tax burden 40% of GDP. This goal has been set both in the mid-term budget forecast and in the agreement of the three-party coalition. If the tendency from the first six months remains the same, we can forecast an additional 1.2 billion BGN of revenues, which will lead to a total tax burden of about 41.5%. When discussing the budget, this may serve as a strong argument for a higher decrease in tax rates or in pension-tax payment .
The accumulated surplus for the first six months is 1407 million BGN. This is similar to the numbers from November 2005.The consolidated budget’s revenues have increased by 8.3%in comparison with the same period in 2005. If we eliminate the social security budget, the growth rate will become even higher – 11.8%.
Revenues from VAT and excise taxes increased by about 15% in comparison to the first half of 2005. Revenues from corporate tax are also surprisingly higher - 24,3% more. Although the growth of excise taxes was expected because of the increased tax rates, the only explanation about VAT is the expanded tax base; mostly because of the increase of raw material prices, imports and consumption.
Some of the recent changes in tax rates resulted in manifestation basic economic laws in real conditions. For example, the pension payment decreased with 6 percentage points which did not lead to decreased revenues. This can be explained with the increase of the minimum pension thresholds and the increased employment. The decrease to 15% in the corporate tax for 2005 ( payments are due in 2006) also stimulates the declaration of higher taxable incomes.
The increasing dependency of the budget on indirect taxes (mainly VAT and excise taxes) presupposes a strong dependency of revenues on international market conditions. So far, gas and raw material prices are high (compared to the last 10 or 20 years) and that’s the main reason for the expansion of tax bases, especially regarding imports. Thus the government will benefit from the increased prices. Development in the opposite direction will probably threaten the local producers of similar products and will directly restrict the VAT revenues.
The accumulated surplus for the first six months is 1407 million BGN. This is similar to the numbers from November 2005.The consolidated budget’s revenues have increased by 8.3%in comparison with the same period in 2005. If we eliminate the social security budget, the growth rate will become even higher – 11.8%.
Revenues from VAT and excise taxes increased by about 15% in comparison to the first half of 2005. Revenues from corporate tax are also surprisingly higher - 24,3% more. Although the growth of excise taxes was expected because of the increased tax rates, the only explanation about VAT is the expanded tax base; mostly because of the increase of raw material prices, imports and consumption.
Some of the recent changes in tax rates resulted in manifestation basic economic laws in real conditions. For example, the pension payment decreased with 6 percentage points which did not lead to decreased revenues. This can be explained with the increase of the minimum pension thresholds and the increased employment. The decrease to 15% in the corporate tax for 2005 ( payments are due in 2006) also stimulates the declaration of higher taxable incomes.
The increasing dependency of the budget on indirect taxes (mainly VAT and excise taxes) presupposes a strong dependency of revenues on international market conditions. So far, gas and raw material prices are high (compared to the last 10 or 20 years) and that’s the main reason for the expansion of tax bases, especially regarding imports. Thus the government will benefit from the increased prices. Development in the opposite direction will probably threaten the local producers of similar products and will directly restrict the VAT revenues.
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