Losses from Flat Tax Rate on Earnings Will Be Offset, Social Partners Say

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Losses from Flat Tax Rate on Earnings Will Be Offset, Social Partners Say

This week the trade unions are going to host a meeting with experts of the Labour and Social Policy Ministry and representatives of employers organizations for the purpose of mapping out measures that would offset the reduction in monthly incomes of 400-450 leva after the introduction of a flat tax rate on earnings as of January 1, 2008, Labour Minister Emilia Maslarova told a news briefing Monday.

She and the social partners considered ways to offset low-bracket incomes levied with a flat tax and general conclusion of employment contracts.

In Maslarova's words, an allocation of 55 million leva has been made for this purpose. The money is designed mostly for the food and processing industry, agriculture, and the private sector. The new recommendable wage increase rates will be ready by March 2008.

A total of 1,200,000 earners will lose from the flat tax, and 1,500,000 will gain by it, Confederation of Independent Trade Unions in Bulgaria (CITUB) President Zhelyazko Hristov said. In his view, Bulgarian business needs 130 million leva to offset the losses of employees paid about 400 leva. According to CITUB estimates, the situation in ten sectors, including the food and processing industry and the light industry, will be the worst. The losses in these sectors alone will come up to 83 million leva.

The conclusion of collective employment contracts will bring part of the grey economy to light, Vassil Velev of the Industrial Capital Associaiton said. Expressing the view of employers, he said that the introduction of a flat tax rate on incomes without fixing a non-taxable threshold will make the economy more competitive.

CITUB Vice President Plamen Dimitrov proposed to add a loss offsetting amount to the monthly remuneration of workers.

Bulgarian Industrial Association Vice President Dikran Tabeyan believes that incimes can be compensated by a one-time rise in wages.

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