The Bulgarian Ministry of Finance abandons the idea of additional tax for mining companies

The Bulgarian Ministry of Finance (MoF) has decided not to impose an additional tax on mining companies, and instead they will have to pay a one-time contribution to the budget. This was stated by the interim Finance Minister Lyudmila Petkova, who participated in a parliamentary Q&A on Friday. The decision shift, which is similar to the refusal to tax the excessive profits of banks, was reached after intensive talks with the business community.

An agreement was reached with the business to pay a contribution for the underground resources, it will be a one-time payment for 2025," Petkova announced.

Its size will depend on whether it is a question of metal-containing ores or other minerals.

On Wednesday, mining industry representatives staged a protest in front of the Council of Ministers, claiming that a new 15% tax would make the sector uncompetitive compared to other European countries.

The one-time contribution, however, will not be able to match the amount that could have been collected from the extraordinary tax, which according to initial estimates was going to add 450 million euros to the coffers. Petkova, however, explained that after Bulgaria's full accession to the Schengen area, the authorities made some re-assessments and now they expected to receive more revenue from this line, although she did not clarify what she meant by that.

The income and expense amounts remain the same, but a compensation mechanism has been found," said the finance minister.

In addition, the draft budget provides that the Minister of Energy will propose a change to the regulation governing concession fees.

Some of the contracts were concluded 30 years ago and it is very difficult for the state to unilaterally change the concession fee without the consent of the other party," Petkova added.

The interim government submits the 2025 Budget

Petkova stated that today (Friday) the caretaker cabinet is expected to submit the draft budget for next year for consideration by the National Assembly.

The texts will reflect the changes in relation to concession fees and the one-time payment contribution for the mining industry.

The now-cancelled levy on banks' excess profits is also expected to be seen there. It was initially expected to generate revenues for the treasury to the tune of 405 million euros.

However, the banking sector opposed the idea, and the Ministry of Finance held an urgent meeting to clear up the ambiguities.

We analyzed what taxes will be paid in 2025 and the banks' forecast is for twice as many taxes as calculated in the budget. This is normal, because they have much more information about their predicted profits and payments, so the Ministry of Finance works with summarized data," said Petkova from the National Assembly rostrum.

More specifically, according to the banks' estimates, next year they would pay 563 million euros in taxes, so levying an additional tax would double that burden, even though 2024 is shaping up to be the second consecutive record year for banks, in which their collective profits exceed 1.5 billion euros.

That's why we cancelled the planned tax and not because of pressure from the banks," argued the finance minister.

However, Petkova still left a small loophole for the introduction of this tax.

The issue remains open. A proposal has been prepared, and if the MPs decide to introduce the tax, we are ready to provide information and regulations," Petkova announced.

The Ministry of Finance will finance the BDB by taking on more debts

During the parliamentary discussions, the topic of the sharp increase in the public debt was also raised. In the medium term, the finance ministry’s Budget Forecast for the next four years predicted that Bulgaria's debt would increase by more than 15 billion euros. 

However, Petkova explained that in addition to covering the budget deficit and refinancing previous debt, part of the funds will also be used to cover the costs arising from the two planned tax amnesties.

The draft budget includes two tax amnesties - one concerning the payment of outstanding taxes and social security contributions with the remission of outstanding interest, and a second one, which will apply only to undeclared individual incomes in the last 5 years, which will be taxed at between 15 - 20%.

At a briefing on Wednesday evening, Petkova explained that since not all companies and individuals would have the financial ability to cover their obligations, the Ministry of Finance will inject resources into the Bulgarian Development Bank (BDB) - in the amount of about 1 billion euros, which can be used to issue loans for this purpose.

Separately, part of the public debt will be used as reserve funds for the central bank (BNB), expected to amount to 500 million euros.

Translated by Tzvetozar Vincent Iolov