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Politics : Formerly About Advanced Micro Devices

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From: TimF	11/18/2004 7:22:03 PM
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Read My Lips: No New Greeces By Georgi Angelov In 1997 the corporate tax in Bulgaria was 40.2 percent. At the moment it is 19.5 percent and the government wants to cut it to 15 percent from the beginning of 2005. The personal income tax's top rate was 40 percent in 1997; it is 29 percent now and it will be cut to 24 percent in 2005 according to government plans. Thus in 2005 Bulgaria will have one of the lowest profit and income taxes in Europe. Moreover, the Institute for Market Economy started a campaign for introducing a 10 percent flat rate for all direct taxes - corporate tax, personal income tax and social security tax. So the tax cutting in Bulgaria will most probably continue And Bulgaria is not an exception: There is a zero percent tax on the reinvested profit in Estonia. The corporate tax in Serbia is 14 percent and the government proposed a cut to 10 percent. In Latvia, Lithuania and Macedonia the corporate tax is 15 percent and the Lithuanian government is considering a cut to 12.5 percent. The corporate tax in Hungary is 16 percent and it might be cut to 12 percent. What all this shows is that tax competition is working in Central and Eastern European countries and most of them are trying to follow the successful Irish example - to have faster economic growth through low taxes and free economy. However, there are some voices within some of the European Union's old member countries, such as Germany and France, that are trying to stop this development toward lower taxes in the so-called New Europe. The ruling parties in Berlin and Paris are against tax competition (however, it seems that the opposition in Germany is not supporting the government's position). Their reasoning goes something like this: We (the old members of EU) tax our companies at high rates and give the money to you (the new members of the EU or candidates). You use our money to cut your taxes and that is unfair competition. Let us see if that is true. First, countries cannot use EU funds to cut taxes, because EU funds are designated for certain purposes (like agrosubsidies for example). Second, if we compare the corporate tax we will see that it is 38.3 percent in Germany and it is 19.5 percent in Bulgaria. It looks like Germany extracts more money from the economy through the corporate tax than Bulgaria. But the reality is different - in Germany there are so many tax loopholes that a lot of companies are paying no taxes at all. In Bulgaria there are almost no exemptions. So that it is not surprising that according to Eurostat, Germany collects only 0.6 percent of GDP through the corporate tax. In Bulgaria the revenues from the corporate tax are about 3 percent of GDP. Obviously Bulgaria's lower tax rate generates more revenues than Germany's high rate with many loopholes. But this is not a problem of the Bulgarian government - it is a decision of the German government to create such a tax system and only the German government can change that system. If the loopholes are eliminated, the German government can introduce a corporate tax rate of 5-10 percent without any loss of revenue... techcentralstation.com

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