Employers against new 'excess profits' tax

In a letter to Prime Minister Galab Donev and Minister of Finance Rositsa Velkova-Zheleva, the four employers' organizations united in AOBR, declare against the introduction of a new "excess profit" tax, defining it as a deprivation of income from successful Bulgarian enterprises without legal and economic basis.

Here is the full text of the letter:

Bulgarian business, united in the Association of Bulgarian Employers' Organizations (AOBR), is very concerned about the draft Law on Amendments and Supplements to the Tax and Insurance Procedural Code (TIPC) published on the website of the Ministry of Finance. It proposes amendments and new regimes, through which it is expected to generate additional revenues in the state budget for 2023, to increase the collection of revenues from existing sources and to cancel part of the fiscal reliefs of a temporary nature introduced in previous years budget years. In our opinion, the changes allow for the deprivation of income from successful Bulgarian enterprises without any legal and economic basis through the introduction of the so-called "excess profit" tax.

It is impermissible in a country governed by the rule of law, in the absence of a functioning parliament, for an ad hoc government to plan such an encroachment on the inviolability of private property, in this case the profits of private commercial enterprises. Provided that the relevant enterprise has paid all its public obligations, including corporate tax, there is no reason to request any additional payment to the budget in any form. We believe that the proposed proposal violates the spirit of the provisions of Art. 16, paragraph 2 of the Public Finance Act (PFA), according to which changes to taxes and mandatory social security contributions in all their elements must not be expected to enter into force earlier than the entry into force of the law on the state budget and/or the laws on the budgets of the National Health Insurance Fund and of the state social insurance for the relevant year or from their amendment and addition. Although the texts of the ZPF have not been formally violated, they do not envisage a scenario in which, at the end of the first quarter of the current year, society does not have a draft law on the state budget approved by the Council of Ministers and submitted to the National Assembly.

Despite the lack of support for investments, Bulgarian business has shown that it can work well and has successfully passed through the unprecedented crises of the past three years. We have the highest export growth and the highest wage growth in the entire EU, with one of the lowest inflation rates in Central and Eastern Europe. Some sectors, especially in industry, have performed excellently and it is from these well-run businesses that the government is preparing to extract income through the proposed extraordinary levy. All this is done without taking into account the huge challenges facing the entire European economy, with all possible additional burdens and requirements, such as: the green deal and the carbon footprint, introducing the circular economy and investing in numerous bureaucratic requirements and administrative regulations. Instead of business focusing funds on investment and innovation, training and better pay for employees, which are becoming more and more expensive, the Bulgarian government is stopping its progress with unacceptable tactics, such as the proposal to introduce an "excess profit" tax, called populist " joint contribution' for private companies. Thus, the whole idea of a real market economy will lurch towards a command-administrative system, and the latter has historically proven its unviability and inefficiency.

We cannot stand in solidarity with the irresponsible spending of budget funds, combined with high inflation and the absence of intentions to limit budget expenditures.

Compensation for exorbitant electricity prices is a European policy to straighten out the distorted market. This is not "aid for business", but a recovery, and only a part, of what was taken from the enterprises. These are not gifts to be asked back. Even after compensation, electricity prices for businesses in Bulgaria remain above the average for businesses in other countries with which we compete and are three times higher than household prices.

The proposed regime of taxation through advance payments in the period July-December 2023, based on financial results of completed tax periods, implies an additional and unforeseen seizure of income from Bulgarian enterprises, including those that in the current year will realize losses or -low profits compared to 2022

Such proposals raise the unpredictability, send a negative signal to local and foreign investors and are a prerequisite for worsening the conditions of the business environment in our country. It would be a return to the old and vicious practices of years ago to create a means of robbing the most successful businesses in the state by forcible entry into the businesses. We will also provide an informed opportunity to the criminal sector for its criminal activity.

In connection with the above reasons, which are clearly inadmissible and unacceptable for a market economy, we believe that the Ministry of Finance should immediately withdraw what was done in § 32 "In the Law on Corporate Taxation" from the transitional and final provisions of the draft Law on Amendments and Supplements of TIPC, inadmissible proposal.

The letter was signed by Tsvetan Simeonov, Chairman of the Board of the BCCI and Chairman of the AOBR for 2023, on behalf of the four donor organizations AIKB, BSK, BCCI and KRIB.