"Progressive Bulgaria" prepares higher local taxes through new tax valuations

A few days after Prime Minister Rumen Radev spoke about introducing a progressive property tax for owners of multiple properties, "Progressive Bulgaria" is already outlining a different direction – updating all tax valuations in the country. Such a change would lead to a higher "property tax" (real estate tax), a larger garbage collection fee for all owners, and higher revenues in municipal budgets from property transactions, without formally touching the rates.

This became clear from an interview of PB MP Stefan Belchev for the national radio. He confirmed that the topic of tax valuations is on the agenda and that the ruling party sees it as a tool to strengthen local finances. In parallel, the party is inclined to discuss the gradual introduction of personal social security contributions for civil servants, seeking a mechanism that would not reduce their actual income.

The Prime Minister's initial idea was aimed at owners of a larger number of properties who would pay a higher "property tax" rate. Radev himself admitted that the implementation of such a progressive scheme is complex and requires full integration of the information systems of all municipalities so that it is clear who owns what and where. Therefore, Belchev outlined an alternative approach – a general update of tax valuations, which in practice will affect every owner, even if they have only one home.

He recalled that property tax valuations have not been updated since 2009, while the real prices of homes and plots in large cities have increased many times over. Updating them is among the recommendations of both the OECD and the IMF. According to him, the revenue from "property tax" in our country is about 0.2% of GDP, while in Greece this share reaches 2% of GDP – a difference that shows potential for additional revenue if the tax base is modernized. However, Belchev did not specify the scale of the increase being considered or whether the change will be reflected as early as the 2026 budget.

In parallel with the debate on local taxes, there is also a conversation within the government about the personal participation of civil servants in the social security system. Currently, their social security contributions are covered entirely by the budget. Belchev stated that a "gradual introduction" of personal social security is possible, but only on the condition that the loss in net income is compensated for a transition period. The idea is for civil servants to gradually start paying a personal portion of the contributions, as is the case for those employed in the private sector.

He reminded that when personal social security contributions for civil servants were removed in the past, this was accompanied by a corresponding reduction in their salaries. There is currently a bill submitted by "Democratic Bulgaria" which provides for a starting personal contribution of 2%, increasing to 5% in 2027 and to 14% in 2028. However, with the parallel introduction of a compensatory mechanism, no significant savings for the budget are expected. Belchev did not provide specific numbers for the starting contribution that PB would support.

Against this background, the topics of other direct and indirect taxes – "PIT" (annual personal income tax declaration), "vehicle tax" for cars, and "sole proprietor tax" for individual traders – remain in the background. From Belchev's words, it was understood that at the moment, the ruling party is not planning a direct increase in their rates, but rather relies on better collection and expanding the tax base through updated valuations and less of a shadow economy.

The MP also commented on the issue of salaries mechanically tied to the average salary in individual sectors. According to him, there is no final decision yet, but the very approach of automatic indexing was a mistake and a more sustainable model of wage formation is being sought.

According to Belchev, a large reserve for state finances is the higher collection of existing taxes – both "PIT", as well as "vehicle tax", "sole proprietor tax", and other revenues. The ruling party is planning intensive digitalization and the introduction of artificial intelligence in revenue administrations – the NRA and customs. "Even if we bring 5% of the economy into the light, that is equivalent to hundreds of millions in additional revenue," noted Belchev, emphasizing that the focus is on modernized control, not on a sharp increase in rates.