31.10.2011

The Government approved the draft State Budget of the Republic of Bulgaria Act for 2012 at a special meeting today, as well as some minor amendments to the tax laws for next year in relation to some EU requirements. The Deputy Prime Minister and Minister of Finance Simeon Djankov labeled the 2012 draft budget to be submitted in Parliament for consideration later today as "a conservative one within the framework of what is going on in national and EU economy".

The minimum fiscal reserve amount will be retained at its level of BGN 4.5 billion for the current year, which will ensure a sufficient level of Government's flexibility within the framework of the issuing policy for the following year. The draft budget projects a real growth of 2.9%, a harmonized year-end inflation of 2.8%, with FDI being foreseen to reach 2.8% of projected GDP.

The Government revises the fiscal objective for 2012 in the draft budget by setting a Consolidated Fiscal Programme deficit of 1.3% of GDP without altering the commitment for long-term sustainability and feasibility of tax insurance policy. The fiscal stance planned for 2012 is envisaged to be attained at an amount of CFP revenue of 35.2% of GDP and an amount of CFP expenditure of 36.5% of GDP.

The 2012 draft budget actually envisages more funds for the Ministry of Health budget aimed to improve the working conditions and the payment of emergency centres. The funds envisaged for the Ministry of Culture are by BGN 15 million more, while the expenditure ceiling of the Ministry of Education, Youth and Science is increased by BGN 50 million.

An increase in the minimum wage from BGN 270 to BGN 290 is also envisaged as from 1 April 2012. Opportunities will be sought next year to increase the lowest pensions, said the Finance Minister after the Cabinet's meeting.      

The low levels of taxation will be preserved in 2012 and the tax burden will be shifted from the direct to indirect taxes by the smooth increase in the excise duty rates of some energy products in view of reaching the minimum EU taxation levels in accordance with the agreed transition periods. The introduction of an excise duty rate of BGN 0.85 per GJ for natural gas used as motor fuel, BGN 0.10 for natural gas used for heating and a zero tax rate for natural gas used in households is envisaged. The purpose is a gradual transition to the levels of taxation of natural gas required by EU legislation by the end of 2013.