Tripartite Cooperation Council rejected proposed VAT reduction for foods and med

At a meeting of the National Council for Tripartite Cooperation on 19^th of June, business organizations and the Confederation of Independent Trade Unions (CITUB) rejected the Bulgarian Socialist Party’s (BSP) bill for reduction of VAT for foods and medicines. Only Podkrepa Trade Union supported the measure. At the opening of the new session of the National Assembly, the idea for VAT reduction came from MRF MP Delyan Peevsky, who proposed VAT reductions for bread, medicines and books. However, BSP handed the the draft law first.

Georgi Gikov, one of the MPs who is the author of the draft law, presented the reasons for the proposed reduction of the tax on some of the basic goods. According to him, the Bulgarian production will be encouraged, prices will fall on the market and the motive for VAT reduction for medicines was that consumers now pay 80% of the medicine prices.

According to Vassil Velev of the Industrial Capital Association, the lower VAT will reduce the budget revenues by BGN 1 billion, without lowering the prices, but rather increasing the profits of the traders.

Representatives of the Bulgarian Industrial Association said that Bulgaria is now in the waiting room of the Eurozone. Therefore, all changes should be carefully considered, and if something is done it should should be at a later stage.

CITUB did not support the proposal on the grounds that there is no mechanism to reach lower prices when lowering the tax.

Only Podkrepa trade union supported the reduction of VAT rates for some essential goods.

Finance Minister Vladislav Goranov, however, said that the state does not intend to change the VAT rates. He warned that if the VAT rates were to be reduced, social security instalments would have to be raised.

Minister of the Economy Karanikolov welcomed the debate and the search for the right solution, but it was firm that he would personally prefer measures that would lead to increase in the people’s incomes rather than reduction in prices, because no one can currently guarantee that prices would drop if VAT is reduced.

According to Georgi Giyokov from BSP, the reduction of VAT does not necessarily mean that the profit will remain with the traders without reduction of prices for the end consumers.

According to Giyokov, in the first 6 months after a reduction in VAT, there may be no reduction in foods and medicines prices, but then the drop in the prices of these goods is guaranteed.

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