A parliamentary committee on economic policy, investment and industry today rejected a GERB-SDS proposal to temporarily cut excise duty and VAT on fuel. Eight MPs voted for it, 2 voted against and 8 abstained.
This report follows our earlier story on the GERB-SDS proposal for a temporary cut in fuel excise duty and VAT, which MP Krasimir Terziev announced in a statement to parliament.
The item was not on the committee's agenda. Alexander Ivanov of GERB-SDS asked for the draft to be heard the same day. MPs agreed, and he presented it. The document is a recommendation to the Council of Ministers.
Under the draft, the finance minister should ask the European Commission for permission to set fuel excise duty below the EU minimum. It also asks for a Commission opinion on lower VAT, including options for a rate of up to 9%. The government would send parliament an analysis and legislative options for a temporary cap on the price of main fuels when international prices are extremely high.
In the scenario set out in the recommendation, excise duty is cut and 9% VAT applies to the resulting tax base. Ivanov's calculations, based on average prices from the previous day, show diesel falling from €1.96 to €1.53 a litre and A95 petrol from €1.69 to €1.29. Ivanov pointed to Croatia and, in part, Poland, where he said retail prices have returned to pre-crisis levels.
Ivanov said dearer fuel pushes up the price of services, food and other goods. He said the GERB proposal would cost the budget less than the ruling parties' €330m package. That package pays €50 even to people who may not own a car, he said, and does so during an election campaign.
Stefan Belchev of Progressive Bulgaria abstained because the finance ministry has given no opinion. He called the measures hasty and calculated that over six months they would cost the budget between €400m and €500m. Slavi Vassilev of the same group called the proposal populism that would only add to the strain on public finances. He said it was ill-timed with a deficit of 5.7% of GDP.
Martin Dimitrov of Democratic Bulgaria said measures against rising prices are needed, but the GERB-SDS proposal risks a higher budget deficit. Democratic Bulgaria wants the money to support households to come from a windfall tax on the oil sector, which the ruling parties' current proposals do not cover. Vassilev disagreed. He said such a tax applies to firms that move their profits out of the country, and Bulgaria's oil sector is not one of them.
Bayram Bayram of the DPS said his group backs the measures. The DPS usually opposes changes to tax laws in the middle or at the end of the year, he said, but action is needed when fuel and food prices rise.
Bogdan Bogdanov of We Continue the Change said the party would back the draft because it only makes recommendations, and the executive decides whether to use them or offer a more creative solution. He said Bulgaria is one of few countries without adequate measures against rising prices, with fuel here reaching €2 a litre.
Konstantin Prodanov of Progressive Bulgaria said the government has already taken steps for vulnerable groups, including the so-called inflation cheques, and could add more if the fuel price crisis worsens. He asked Dimitrov and Democratic Bulgaria to submit their proposals to include the oil sector in the windfall tax.