Expecting “Luxury Tax”

published on 4/20/10 1:51 PM

The most expensive house in Bulgaria awaiting its new owner at the price of EUR 6.5 million!

Photo: Tanya Harizanova

“Luxury tax” that is expected to bring 35 million levs (17 million euro) to the Bulgarian treasury will enter into force on July 1. The tax is one of the anti-crisis measures of the government and will affect the owners of real estate with property tax evaluation of over 300 000 levs (150 000 euro) and of cars costing more than 70 000 levs (35 000 euro). These owners will pay double the regular taxes, while owners of yachts, airplanes and personal helicopters will pay triple the regular tax. According to statistic data by the National Revenue Agency, owners of yachts, luxury cars, and football clubs have evaded 26 million levs of taxes.

“There is no country in the world to have solved a major economic problem though taxes on luxury,” economist Lachezar Bogdanov says. He has called such types of taxes “exotic and extravagant.” According to other experts, the new tax will have a negative effect on investors. Real estate brokers worry that the new tax will further shrink the sales of luxury apartments. But whoever buys a house for a few hundred thousand euro will not be bothered by the additional tax, others maintain.

“The positive effect of this measure cannot be sufficient and will not affect the budget,” Ruslan Stefanov from the Center for the Study of Democracy told Radio Bulgaria. “All new taxes must be carefully considered. Probably some people will pay this tax, while others will try to avoid it by transferring their property to children and grandchildren. It is the same with luxury cars as one can register their car in Greece. You can move your company to another country. Generally, there are a number of options. This shows that the new tax wouls not be a very effective solution and is probably not really necessary. This tax changes the whole tax policy of the Bulgarian governments in the last 10 years.”

Economists claim the “luxury tax" is sheer populism and will not bring the expected 35 million levs to the treasury. For example, 40 % of the yachts in Bulgaria are not owned by Bulgarian companies or are registered in neighboring countries. Still those with a Bulgarian flag on them are usually registered as transportation vessels. The case with airplanes and helicopters is the same. They are mostly registered as owned by transport companies. Analysts say that the luxury tax on expensive cars will be easily collected but this will shrink the auto market. Real estates with tax evaluation of 300 000 levs are usually apartments of 170-250 sq meters. Owning one is not a sign of prosperity, as there are a number of big old apartments in the center of Sofia but heirs are not always rich people. An issue of finding these luxury apartments also arises, as there is no national register that includes this parameter. Despite arguments against the new tax, luxury is part of the Bulgarian reality. Neighborhoods looking like Orange County amaze people with houses costing more than a million euro. The most expensive house in Sofia awaits its new owner, who would have to pay 6.5 million euro.

English: Alexander Markov

По публикацията работи: Tanya Harizanova

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Expecting “Luxury Tax”

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