Saturday, 21 November 2009

Taxing Home Made Rakia Is A False Economy

This recent report repeats to a tee my own thoughts on the taxing of rakia in Bulgaria. It is a false economy and unfair taxation will give a knee jerk to the government coffers as the reaction will be tax evasion nationwide. All Bulgarians are praying that these politicians do the sensible thing and not pass this law. If it is passed the politicians that put it through will have committed political suicide or worse!

Taxing Home Made Rakia Is A False Economy

The strong public opposition to price hikes prompted Prime Minister Boiko Borissov to axe the Finance Ministry proposal to increase the excise duty on spirits, but the plan has been resurrected by Parliament's budget committee.

The 2010 Budget bill was passed by Parliament at first reading on November 17. The budget committee, meeting to discuss amendments before the second reading, passed the proposal to increase the spirits excise duty by 13.6 per cent to 1.25 leva a litre of pure alcohol, which will translate into a 0.7 leva to 0.75 leva a bottle increase in the retail price of spirits, Bulgarian media reported.

The amendment was tabled by MP Kircho Dimitrov from the Blue Coalition, which is backing the minority government of Prime Minister Boiko Borissov, but is not represented in Cabinet. Stoyan Mavrodiev, from Borissov's GERB party, opposed the proposal saying that it was unlikely to pass on Parliament floor.

Mavrodiev said that the increased excise duty would push more spirits producers to stop paying taxes and operate in the grey economy.

Former finance minister Plamen Oresharski, now an MP, echoed the sentiment, saying that collection of excises from spirits producers was one of the most difficult task faced by the National Revenue Agency. He said that rather than boosting Budget revenue by 60 million leva, the higher excise would have the opposite effect and cause spirits makers to stop paying taxes altogether.

The excise on home-made rakiya, which is set at half the size of the regular duty, will become 625 leva for 1000 litres. It was the increase in the excise duty on home-made spirits, a sensitive subject in Bulgaria, where home-made wine and rakiya are centuries-old traditions, that provoked public discontent. Households are allowed to make up to 30 litres of rakiya a year without paying tax.

An amendment to increase the excise duty on beer was rejected by the budget committee.

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