site.btaUPDATED Caretaker Cabinet Approves 2025 Draft Budgets

The caretaker cabinet Wednesday approved the 2025 State Budget Bill and the draft budgets of the National Health Insurance Fund and of the public social insurance system, Finance Minister Lyudmila Petkova told a news briefing.

She recalled that the Finance Ministry had analysed the trends in revenue and expenditure growth: "Back in September, it was found that expenditure significantly outstripped revenue. Revenues had grown by around BGN 4-5 billion per year, while expenditures had grown considerably. As a result, the gap between revenue and expenditure for 2025 was set at BGN 18 billion, with a deficit of 3% of GDP. The projected GDP for 2025 is BGN 215 billion, so the deficit is around BGN 6.4 billion."

The Finance Minister also said: "The question was how to deal with the difference of BGN 11-12 billion to meet the deficit ceiling set in the Public Finance Act and the Finance Ministry drew up a package of revenue and expenditure measures that were discussed."

Petkova added that Bulgaria is on the threshold of joining the euro area and must adhere to certain criteria.

Revenues

Petkova stressed the budget revenues are projected at BGN 92 billion on the basis of the Finance Ministry's autumn macroeconomic forecast. The total increase in tax and social security revenues is BGN 15.7 billion. Two tax amnesties are planned: for declared but unpaid taxes and social security contributions, and for undeclared income, which are the measures with the strongest budgetary effect. "Both measures have been notified to the European Commission," said Petkova.

An increase in the excise duty on tobacco and tobacco products, alcohol and beer is also effective. The new excise calendar envisages a gradual increase; more specifically, the price of mid-range cigarettes will increase by BGN 0.30 per pack in 2025.

The Finance Minister confirmed that the proposal for a tax on the banks' excess profits has been scrapped.

As to the tax on mining operators, Petkova said she had analysed the practice in other countries and dialogue with the Chamber of Mining and Geology and mine operators is underway. "We would not want any economic sector to be double taxed," Petkova said, adding that a solution acceptable both to the budget and business was being sought.

Four years after the COVID crisis, it is time the reduced VAT rate for restaurant services and gyms was scrapped, the Finance Minister said.

Expenditures

All expenditures approved by Parliament have been factored in: the minimum wage increase to BGN 1,077 from BGN 933 now, the rise in the maximum contributory income to BGN 4,130 from BGN 3,750 now, and the pension indexing rate of 8-9%. The Ministry also sticks to the policy of salary increases for the teaching staff in secondary education and the increase in security and defence personnel costs.