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The value added tax (VAT) for restaurants and entertainment venues such as bars and clubs will be reduced from the current 20% to 9%. Prime Minister Boyko Borissov pledged on Tuesday after meeting with representatives of the Bulgarian Restaurant Association and the Bulgarian Organization of Hotels and Restaurants, the government press service said. The measure, described by the prime minister as a “political risk”, aims to equalize the tax on restaurants with that on hotel accommodation, which is still 9%. Borissov later told reporters in parliament that the amendments would be drafted in a bill that would be ready on Wednesday and that VAT on books could be reduced.
In addition to overnight stays and organized tourist trips, as it is now, the reduced rate will also apply to “establishments, public catering establishments and entertainment sector, classified in the Tourism Law”, The government press service clarified at 12:31 PM Tuesday noon, after announcing approximately an hour earlier that the discount will also apply to “staple foods”.
However, after coordination with the Ministry of Finance “staple foods” They have abandoned the press release.
The low rate will take effect this year, probably from June and not from January 1, 2021, as indicated in the original version of the announcement. The prime minister threatened that authorities would monitor whether the sector would come to light 100% and whether after the rate was reduced by 11%, prices would drop by the same amount. However, it is not clear what will happen if prices do not fall by this percentage and the reduction remains in the pockets of restaurateurs.
The VAT discount is another bonus for the tourism industry. The state promised plenty of measures to save him and make Bulgarians rest in Bulgaria: a 14-day quarantine for Bulgarians vacationing in Greece and Turkey, tourist vouchers, and a revision of measure 60/40 to 80/20 specifically for sector employees. .
“Who does not agree, resign”
Borissov said the decision to cut VAT in restaurants was political, with Finance Minister Vladislav Goranov and head of the budget committee Menda Stoyanova strongly opposed.
“I have complete confidence in the Minister of Finance, but he is not my boss. I am his boss. Whoever does not agree, resign.”,, ,,Borissov said, adding that it was his responsibility for the party and his representation in the elections. He clarified that the measure in support of the restaurant industry is due to the closure of the sector due to the coronavirus.
The decision is under pressure from the Patriots and threats of protests in the restaurant and entertainment business, many of which are not very transparent and financial authorities have so far not brought to light.
NFSB leader Valery Simeonov said the measure would be temporary and would be lifted if it did not work.
At the moment there is no estimate of how much the gift budget for restaurants and bars will cost. They themselves demanded 5% VAT.
Finance ministers from different governments have always been against the differentiated VAT rate. Including due to the fact that every exception opens the door to something new. Without a doubt, we will witness a cascade of demands for VAT deductions for various goods and services.
Vladislav Goranov has repeatedly stated that “As long as I am a minister, VAT will not be reduced”.The rate actually reduced to 9% in the “Tourism” sector was approved during the NMSS with Finance Minister Milen Velchev, whose brother currently manages some of the most expensive hotels by the sea. VAT is not due for some goods and services. For example, there is no VAT on gambling, so no more money is drawn from the budget than is imported.
The news of the VAT cut in restaurants comes just a day after a similar BSP proposal was rejected by a parliamentary legal committee. However, the left wanted to reduce the VAT rate for food and medicine to 9%, not for restaurants.
GERB will now be under pressure to explain why bread and milk will be taxed at 20% and cocktails in bars at 9%. It is not surprising in the course of discussions the list of exceptions to grow, and with it the risks to the budget, whose main source of income is VAT revenue.
MRF outperforms GERB: offers lower VAT on all products for children up to 3 years old.
Shortly after Borissov’s speech, the MRF announced that it would propose a reduction in the VAT rate for all products for children intended for children up to 3 years of age.
This is not the first time that Borissov and the MRF have fought over VAT. In June 2019, MP and media mogul Delyan Peevski announced during one of his rare visits to parliament that he wanted to reduce the bread and medicine tax to 5%. The Prime Minister then proposed that VAT on books be abolished. It didn’t happen either.
BSP leader Cornelia Ninova criticized the actions of those in power. “It is true that the restaurant and hotel industry has suffered more and needs to be helped. This is also a bit of a piecemeal job. We would like a more integrated mindset.” , she said.
Political risk
Previously, the prime minister announced that the decision for restaurants and entertainment venues to pay 9% VAT is a political risk, but supports Covid-19’s losses in the restaurant industry, Borissov said.
“We make an exception for you, because with our order the sector is closed, figuratively speaking. And this is the case throughout the world. This may be a measure that will later give good results and will be lasting. Everything is in our hands.”, Added the Prime Minister.
He emphasized that with the changes discussed in this way with the reduction of VAT, it means that the turnover and activity of restaurants and hotels should be 100% in light.
“In this sense, we are obliged to fulfill our commitments. The Minister of Finance is very much against it, but I want to refute it at the end of the year with more income.”Prime Minister Borissov said.
According to him, VAT income will be monitored month by month. “As politicians, we must try to support industries and the people. VAT does not apply to the industry itself, but to the tax in favor of the state.” When the tax drops 11%, I wonder if prices will drop 11%.. We will continue this and, if so, we can talk about a further reduction “Borissov told the media.
“We are committed to making this happen the way we talk to you.”representatives of branch organizations said after their conversation with Borissov, quoted by the government press service.
Postpone changes for cash registers again
At the meeting it was agreed to postpone the entry into force of the changes in Ordinance H-18 with the requirements for cash registers. After the last postponement due to a restaurateur protest and the six-month delay until March 1, 2020, they will now have another year, until March 1, 2021, to meet the cash flow statement requirements in line at the time of the transaction ..
During the meeting it was stated that the preparation of a crisis plan will be assigned, including the provision of loans and grants by the Bulgarian Development Bank with the participation of experts from the “Tourism” sector.
The abolition of the non-debt criterion with the state only for 2020 was also discussed when requesting measures to face the economic consequences of the coronavirus.
The changes, which were agreed at the working meeting with Prime Minister Borissov, will be presented today to the National Assembly by the parliamentary group GERB.
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