site.btaParliamentary Budget Committee Votes Down Maintaining 0% VAT on Bread

The Parliamentary Committee on Budget and Finance rejected on Tuesday the amendments to the Value Added Tax (VAT) Act that were submitted by BSP - United Left Co-Floor Leader Atanas Zapryanov and a group of other MPs, which envisaged a zero rate for bread and flour until the end of 2025. The amendments were supported by 9 MPs, no one voted against, and 11 abstained.

The VAT rate on bread and flour returned to 20% on January 2025. The rate had been reduced to 0% in July 2022 because of the COVID-19 pandemic.

A VAT rate of 20% will lead to a price spike of 20 to 23%, the sponsors of the legislation said. They argued that the cost of production in 2025 is expected to increase as a result of the increased minimum wage and higher electricity and natural gas prices, which means an increase in the prices of consumables for bread production, leading to the selling prices increasing between 5 and 7%.

Caretaker Minister of Finance Lyudmila Petkova said that if the rate was reduced to zero, the state budget would see some BGN 97 million less in revenue.

The President of the Confederation of Independent Trade Unions in Bulgaria (CITUB), Plamen Dimitrov, said that while his Union is in favour of indirect taxes being reduced in general, but not in this case. He explained that CITUB experts had conducted monthly observations on the price of bread in 35 settlements when the zero VAT was introduced and found that the price reduction ranged between 5 and 6%, lasted for a few months and only for some types of bread.

Another amendment tabled by BSP - United Left and voted down by the Committee with 10 votes in favour and 10 abstentions provided for VAT on medication paid by the National Health Insurance Fund to be reduced to 9%.

While the sponsors argued that this amendment would have lowered the prices of medical products in Bulgaria, as they are "some of the highest ones", Petkova said that applying differentiated rates would mean some BGN 122 million less entering the state budget.