Bulgaria's prime minister has described taxes in his country, which has a flat tax applicable for all income levels and one of the lowest effective rates in the world, as "fantastic".
"Bulgaria has at the moment low, favorable, fantastic tax rates. I would have rather expected our employers and businessmen to take every care that nothing bad is said about the government," Boyko Borisov told his ministers, according to the shorthand from their meeting on Wednesday.
"Given the conditions of any other European country, I would expect employers and businessmen to openly declare that should they go bankrupt tomorrow, they will transfer 100% of their business in Bulgaria. "
"It is because of countries like Bulgaria, who insist that they keep taxes low, that the European Union wants to introduce unified taxes. Bulgaria is against this proposal, because we made a tax heaven out of it," Borisov said, adding he was "ill at ease" when he had to explain how low tax rates in Bulgaria are during his recent meetings with the Hungarian Prime Minister Viktor Orban and German Chancellor Angela Merkel.
"The easiest thing to do is to increase the tax rates and rake more revenues into the budget. But we are not doing this."
Bulgaria is among the top ten countries in the world with the lowest effective rates and is preceded only by Hong Kong, tax havens like the Bahamas Islands and petro-states like Saudi Arabia, showed earlier this month an analysis by KPMG consultancy.
Effective rates are derived by taking total income tax and/or social security over gross income prior to deductions. The data takes both the personal income tax rate and social security rates into account for employees earning USD 100,000 across 81 countries.
As of 1 January 2008, Bulgaria introduced a 10% flat tax applicable for all income levels,i.e., there is no non-taxable income threshold. It replaced the previous system, which combined several different tax rates - between 20 and 24%, depending on income.
The Bulgarian mandatory social security rate is 13% for an employee, while the rate is approximately 20.5% for an employer (depending on the industry in which the employer is involved as the employment accident fund varies accordingly between 0.4 and 1.1%).
The maximum insurable income is capped at approximately BGN 2,000 per month.
Depending on the circumstances, certain local taxes may apply: immovable property tax, inheritance tax, donation tax and vehicle tax.