site.btaFinance Ministry Abandons Idea about Windfall Tax on Banks’ Profits

The Finance Ministry has abandoned an idea about a tax on banks' excess profits, caretaker Finance Minister Lyudmila Petkova said on Wednesday at an extraordinary meeting of the National Council for Tripartite Cooperation, which is discussing next year's budget.

"Last week there was a meeting with representatives of the banks where they said that all banks will begin to pay the so-called 'global tax' of 15%. They will pay  EUR 1.123 Bln in 2025, which is a significant increase on their taxes from this year. The Ministry did not have this information, and we abandoned the idea for a tax on excess profits, because it will be more than twice the amount paid in 2024," she said.

Petkova also said that tax and social security measures would raise revenues by BGN 8.7 billion.

The biggest revenue effect will come from a tax amnesty, of which the European Commission has been notified, Petkova said. This measure is a one-off, but it will both provide revenue to the budget and help businesses because they have accumulated liabilities during the COVID epidemic, Minister Petkova said. In order to implement these measures, they must be accompanied by loan instruments through the Bulgarian Development Bank and other banks, she said.

The excise duty on tobacco, alcohol and beer will also be raised, Petkova said. "In the EU, a significant increase in the minimum excise duty on tobacco is envisaged, which is why we are proposing an excise calendar until 2029. The increase this year on tobacco products is BGN 0.30," she said.

"The increase in the excise duty on beer is in the thousandths to the  decimal point," Petkova said

For one litre of alcohol (40%) the excise duty will increase by BGN 0.13 per litre, plus a BGN 0.02 increase in VAT on excise duty, which makes BGN 0.15 per litre, Petkova said.

Three VAT-related measures are also proposed. The first concerns the threshold for VAT registration. In the Ministry’s view, it should remain BGN 100,000 to avoid creating unfair competition, Petkova said.

The other measures are to raise the now reduced VAT rates from 9% to 20% for restaurants and gyms, and abolish the zero rate for bread. These were introduced as temporary measures because of the COVID epidemic.

The Ministry believes that the 9% rate did not affect prices, and they gradually and significantly increased, Petkova said.

In her words, there is a large reserve of administrative measures to reduce the share of the shadow economy.

“Regarding the mineral extraction tax, I was left with the impression that there are no problems, but this does not mean that  talks cannot continue so that the measures do not hinder business and create social tensions,” the Finance  Minister said. 

Ahead of the NCTS meeting, there was a protest by miners' unions outside the Council of Ministers building. They insisted that taxes on companies in the industry should not be increased.  

“Under the Recovery and Resilience Plan (RSP) we are now up to the second payment and there are seven payments left, they are nine in total and the deadline ends in August 2026. It is normal to factor in the revenues in the budget,” Petkova said.

We are raising the minimum wage, adjusting pensions, maintaining maternity benefits, proposing to increase personnel costs to 10% and the budgets of Defence Ministry and the Ministry of Interior, and in higher education.

Capital expenditure in 2025 will grow by BGN 4.3 billion. Of this, BGN 1.2 billion is growth in EU funds and programmes, and BGN 3 billion growth from the state budget, the Minister said.