2027 Budget: What Revenue Measures Is the Ministry of Finance Proposing to Reduce the Deficit?

The Ministry of Finance (MoF) presented the revenue measures for 2027, from which it expects the most revenue next year and on which it will rely to close the “hole” in the treasury that landed us in an excessive deficit procedure (EDP) earlier this summer. The document titled “Budget Plan for 2027” outlines these measures and serves as a blueprint for the 2027 draft budget; the Ministry has already submitted it to the European Commission for review.

The government plans to introduce a series of revenue and expenditure measures with a consolidation effect, allowing for a lasting improvement in the budgetary position,” the Ministry of Finance states.

The ministry adds that next year “the implementation of a consistent, predictable and sustainable tax policy will continue, aimed at supporting economic growth, improving the business environment and enhancing long-term fiscal sustainability.”

The priority will be to increase revenue collection, curb the shadow economy and combat tax fraud, tax evasion and the non-payment of taxes and mandatory social security contributions as well as to reduce the administrative burden and costs for businesses and citizens,” the ministry stated emphatically.

According to the ministry this will help correct the excessive deficit and create conditions for sustainable economic growth and financial stability.

What are the specific measures and what effect are they expected to have? Economic.bg explains.

Tax on Excess Profits

The measure expected to make the greatest contribution is the taxation of excess profits in several sectors, including the banking sector. Although it has faced opposition from employers, banks and even the Bulgarian National Bank (BNB), the Ministry of Finance is not backing down from its plan to introduce this one-time additional tax. Subsequently the banking sector warned that it could make loans more expensive and lead to higher interest rates and fees.

The tax base is expected to be the average annual taxable profit of companies for the period 2020 - 2025, and the rate is 33%. The tax will apply only to certain sectors – banks, insurance and reinsurance companies, retailers with at least five food retail outlets (stores, supermarkets and hypermarkets), telecommunications companies, currency exchange bureaus and payday loan companies. What is new is that 30% of the tax is expected to be allocated toward maintaining capital buffers or for investments. The expected revenue is €800 million.

Food vouchers will be taxed

The rules for electronic meal vouchers are changing – the maximum amount per employee is increasing from €102.26 to €200 per month. The old threshold remains tax-exempt while the increased individual allowance will be taxed at 7%. The total annual quota for vouchers increases to €1.5 billion. The positive impact on the budget is estimated at €55 million.

This approach combines the opportunity to increase the amount of the social benefit with the need to secure additional revenue for the state budget,” according to the Ministry of Finance.

For property owners

A requirement for VAT registration is being introduced for taxable supplies related to regulated land and buildings. The aim is to prevent taxpayers from conducting transactions involving land and buildings shortly before registering under the VAT Act, thereby avoiding the assessment of the tax.

Excise Tax on High-Performance Cars

The Ministry of Finance proposes an excise tax on the initial registration or import of new and used luxury cars with an engine power exceeding 250 kW.

The measure aims to increase budget revenues and strengthen tax fairness,” the Ministry of Finance explains.

However as Economic.bg reported following the introduction of the measure questions arose regarding how the power output of hybrid and electric vehicles would be determined. At the time the Ministry of Finance merely stated that it would refine its proposal but no further information is available at this time. Economic.bg also contacted the Ministry of Finance on the matter but received no response.

Higher Fines

The amounts of fines and property sanctions for violations are being updated in all tax laws – including those governing VAT, corporate income tax, personal income tax, excise taxes and tax warehouses, gambling and others.