Challenges of the Knowledge Society (May 2019)
LOCAL TAXES IN BULGARIA- A SOURCE OF REVENUES IN THE MUNICIPALITY BUDGETS
Abstract
Amendments to the Constitution of the Republic of Bulgaria were adopted in 2007 and Article 141 empowered the municipal councils to determine the amount of local taxes under the conditions and within the limits established by law. In practice, with this change, municipalities were given real tax powers for the first time. At the end of 2007, the relevant changes were made to the Local Taxes and Fees Act, which laid down these powers of the municipalities. The following years were extremely turbulent for municipal budgets and for fiscal policy in the country at large. Serious revenue growth in 2007 and 2008 was followed by a decline since the 2009 crisis. It was the crisis that challenged the new powers of the municipalities and revealed the lack of sufficient tools for conducting an adequate fiscal policy at the local level. Municipal budgets inevitably shrank during the difficult years and remain heavily dependent on state transfers. Meanwhile, within their limited powers, municipalities have started to pursue their own tax policy and compete on the level of local taxes. The present article examines the different local taxes according to the tax system in Bulgaria, their rates and their influence in formation of municipality budgets revenues in the Republic of Bulgaria. In the conclusion, the idea of fiscal decentralization is considered and are made recommendations for effective allocation of local tax revenues.
