Bulgaria Tourism Sector Cries Foul over VAT Hike

2010-03-25

Bulgaria's government plans to increase the value-added tax by 2 percentage points to to 22 percent triggered vehement opposition by representatives of the tourism sector, saying the move will be detrimental for them. “Bulgaria's revenues from foreign tourists amount to EUR 2,5 B per year, which means that the tax hike may incur losses worth EUR 50 M,” Lyubomir Pankovski, executive director of Alma Tour travel agency, told Pari daily. Experts say a possible VAT increase will trigger a domino effect in the sector, which will bring about an increase in prices of the final packages offered to travelers and make Bulgaria highly uncompetitive in comparison with its neighbors. “Our expenses will grow and we will look for ways to make them up either by increasing prices or laying off people. These measures can only hurt the quality of the services offered and will undermine the sector,” Rumen Draganov, director of the Institute for Analyses and Assessments in the Tourism Sector, commented. To top it all off experts say early bookings and already signed contracts will all fail if the VAT hike scenario unfolds. Bulgaria's new center-right government plans to introduce a new tax on luxury goods, increase the value added tax to 22 % and cut public servants wages in a bid to help fight the economic crisis and keep down the fiscal deficit. It is part of a package of new measures, which also include floating minority stakes in state-owned companies and a possible bond issue. The government is expected to agree with the trade unions and the union of employers this week a final package of nearly 50 steps to combat the crisis. Representatives from all business sectors have cautioned that the hike in the value-added tax in Bulgaria should be a last-ditch measure that should only be introduced together with an overhaul in government expenditure.