In recent days, Bulgaria’s ruling majority has announced plans to drastically alter the flat income tax, coming into force in 2014. The proposal envisions a sort of tax-free threshold equal to the minimum salary. A “sort of” threshold because if it were the traditional use of the concept – as it was applied in Bulgaria up until a few years ago – then it would have applied to all taxpayers.
Instead, the proposal is that everybody continues to pay the 10 per cent income tax, which would be rebated only to people with low incomes. The goal is for everyone paid the minimum salary, which is set at 340 leva in 2014, to get their taxes back at the start of 2015. According to our calculations, recipients of such rebates will get 355.37 leva a year.
This also means that everyone that wants to get such a rebate will have to submit an income tax declaration. So what is this a bad idea?
The proposal is not a taxation measure, in fact, but a hidden spending measure – under the guise of a tax inc
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