At today's meeting of the Council of Ministers, the draft Law on the State Budget for 2025 was adopted. and the draft laws on the budgets of the NHIF and on the LLP. This was announced by Finance Minister Lyudmila Petkova at a media briefing.
Regarding the preparation of the budget for 2025, the Ministry of Finance had prepared an analysis regarding the trends in revenue and expenditure growth. As early as September, it was established that expenses were significantly outpacing revenues, with revenues growing annually by 4-5 billion. BGN, respectively, the costs, with the exception of recent years, are growing at a significant pace, as a result, a difference was established for 2025. 18 billion BGN with a deficit of 3% of GDP, which for 2025 estimated at 215 billion BGN, i.e. 6.4 billion BGN deficit, the question was raised, these 11-12 billion BGN how to be melted down to meet the deficit as set out in the Public Finance Act. The Ministry of Finance developed a package of revenue and expenditure measures, discussed with the social partners, as well as with some of the parties represented in the 51st National Assembly. We have discussed measures that will have the least negative effect on economic development and investment, as well as on inflation. You know, Bulgaria is on the verge of joining the Eurozone and all criteria must be met in the medium term in order to become part of the Eurozone next year or at the beginning of 2026.
Revenues are estimated based on the published autumn macroeconomic forecast of the Ministry of Finance. There were also reports in the media that revenues were extremely inflated. Yes, the planned revenues are 92 billion. if compared to the plan for 2024, the growth is 17 billion, but compared to the expected performance for 2024, the growth is actually 20 billion. You know, the second and third payment under PVU did not arrive. These funds are planned for 2025. And from 20 bln. revenue growth, 15 bln. are related to tax-insurance revenues and 5 bln. - the non-tax revenues and the benefits and payments from the contributions under the PVA and the European funds, Minister Petkova explained.
Tax-insurance revenues – the total increase is 15.7 billion. 3.8 billion from the macro framework. as a result of the analysis based on consumption, GDP, imports and exports. From the growth of social security revenues, given the increase in social security, the Ministry of Education, the remuneration in the public sector and those foreseen in the Ministry of Defense and the Ministry of Internal Affairs. Regarding tax measures alone, they are 7.6 billion, with the two amnesties having the greatest budgetary effect. One for taxes and insurances declared but not submitted on time, the other – undeclared income. Both measures have been notified to the EC.
Regarding raising the excise duty on tobacco, alcohol and beer – the increases in excise duties so that there is no speculation. It is 13 percent of alcohol. per liter. At 20% VAT, it is 15.6 percent. What is being commented that the price of alcohol will be doubled, this will be a speculative increase and will not be the result of the progressive increase in spirits. Regarding the beer – after the increase, it is raised to 2 tbsp. per liter. You can draw your own conclusions. Regarding tobacco and tobacco products – available in excise calendar until 2029. smooth lifting of the excise tax, as next year there will be 30 art. increase.
Regarding the tax on bank excess profits – we held a meeting with the Association of Banks. From this year, banks pay a minimum global tax of 15%. data show that for 2025 the taxes they will bring in are more than 2x what was basically brought in the previous year, and their predictions are basically more accurate. The taxes they will bring in, in fact an additional tax, will have a negative impact on the entire banking sector. Two times less income from the banking sector than taxes was planned in the budget.
The tax on the extraction of underground resources – we analyzed the practice of other EU member states as well as third countries. Almost everywhere there is a combination of the concession fee with a tax on underground resources. We believe that this is a good approach, but we are in talks with the Mining and Geological Association and with business, because we do not want any of the economic sectors to suffer or be double-taxed. We will offer an option acceptable to both the budget and the business.
Regarding VAT – there are several measures, it was not proposed to extend the reduced rate for restaurant services and for gyms. We believe that this measure was introduced during Covid and 4 years later it is time to repeal it. Regarding the bread – disputes are high, but we suggest that it should not be zero-rated. When the zero rate was introduced, there was no significant reduction in the price of bread. We are still hesitant about this measure.
In terms of costs – the budget is prepared on the basis of current policies, current legislation. Expenses include all expenses voted by the National Assembly. Increase in the size of the Ministry of Health, the Ministry of Defense, modernization of pensions for labor activity according to the Swiss rule by 8-9%, increase in personnel costs in all structures and in the security and defense sector, growth in capital expenditures.
In the revenue and expenditure part, there are revenues and expenses under the PVA and the European programs. There are 9 payments scheduled under the PVA, we have not yet received a second payment. The Plan must be completed in August 2026, which necessitates the urgent implementation of the projects and reforms under the Plan, as well as obtaining the funds to provide for the implementation of the investment projects. If there are no funds, similar funds in this amount must be provided from the budget.
Regarding the investment program – this type was introduced for the first time this year. Specific projects were indicated. Practice has shown that adjustments must be made to the investment program. The investment program is divided into three – administrative capital expenditure, expenditure on information systems and the national projects. The funds have been provided under the budgets of the relevant ministries, with an increase in capital expenditure compared to 2024. in the amount of 918 mln. BGN For municipalities, the growth is 650 million. BGN The capital subsidy for municipalities is separate. We have also commented that part of the projects, even if they have been completed, should be financed by the European programs in order to free up additional resources that can be used for other projects, Minister Petkova further specified.
She considers the budget to be feasible. According to her, the two amnesties are the most risky. There is a possibility of concrete changes in the texts until tomorrow.