Bulgaria's parliament passed on second reading on Monday the amendments introducing a flat tax rate in the country, Sofia News Agency wrote. Despite extensive criticism from the opposition and trade unions, the Socialist-led ruling coalition decided also to drop the provision that exempted the first BGN 200 of all wages from tax. Under the new tax regime, all who earn below BGN 490 will end up paying more in taxes, starting from January.

The corporate tax will remain unchanged at 10% in 2008. The dividend tax rate will be cut from 7% to 5% in 2008. Now that the income tax and the profit tax rates have been leveled, there will be a balance in the corporate and natural persons taxation, according to Ivaylo Marinov, director of CBA supermarket chain, cited by PARI. The burden on the business will even be slightly heavier due to the dividend tax. The dividend tax will not be revoked, according to some of the public companies. It enables the profit to be levied tax twice. The dividend is an obstacle to the reinvestment of the profits, Philip Fotev, director of Exclusive Property special purpose vehicle, said. Some, however, believe that the revocation of the dividend tax will encourage the grey economy. The remunerations of workers and employees will be passed on as dividend in order for taxes to be avoided. Sole proprietors will be levied a 15-percent tax, the MPs decided.

The amendments are final and only a veto from president Georgi Parvanov can stop them from becoming law, although he has given no indication he plans to do so. Bulgaria's parliament has been busily amending the tax legislation over the past month, ringing in the changes required before it can pass the draft budget for next year at second reading.