The appearance of the taxman Robin Hood, who with the new minimum corporate tax of 15 percent will distribute justice to the world and collect their big money from the big capitalists to hand it over to the poor workers around the globe, even though multinational companies welcomed him, is probably postponed for forever. The secret is that this is a media image of the expected effect of the new tax in the style of the noble knight, and the mysterious agreement of corporations to pay 15 percent corporate tax is due to the fact that no one can say what these percentages are, because there is no rules for the common consolidated tax base. Commenting for BTA, Shteryo Nozharov, economic adviser at BIA and lecturer at UNWE, reminded that the EU took an initiative in 2011 to form such a consolidated tax base, but it failed and added that probably after 2023, when it is expected the new tax to be adopted, the debate will resume.
According to Nozharov, after the introduction of the new global tax, Bulgaria will suffer indirect damage. At the moment, Bulgaria does not attract who knows what foreign direct investment or large multinational companies, and in the future, with the global tax, it will attract even less, the economist said.
The global tax for Bulgaria
The economic adviser in BIA Shteryo Nozharov reminded that the reform covers all companies with annual revenues of over 20 billion euro and a profit margin of over 10 percent. The new rules will be used to tax part of the profits of these companies in countries where they have sales. The tax will amount to 20 percent on the amount that exceeds the ten percent profit margin. The second pillar concerns international companies, which have annual revenues of more than 750 million euros and are projected at 15 per cent.
According to Nozharov, there is still time for Bulgaria to express a position on the global tax, because it will be introduced in 2023 at the earliest. The expert reminded that Hungary has already requested a transitional period of ten years. Even Ireland, which benefits most from the current tax regime, has expressed conditional support in principle. Therefore, according to the expert, the countries of the EU and the European continent, which are among the most highly developed, will most likely support this tax in principle, but almost all of them will set some conditions.
According to Nozharov, the global tax will affect few companies in Bulgaria, and its goals are to somewhat equalize the conditions and to stop the “race to the bottom” to offer tax havens and preferences, and the countries to start competing on a quality basis. In highly developed countries, the current tax rate is higher than the proposed rates and therefore the introduction of the global tax will mainly affect the countries of Central and Eastern Europe, which offer tax preferences, said Nozharov.
He added that these countries, including Ireland, insist on preferences, and this coincides with Bulgarian interests. However, the economist pointed out that, in his opinion, Bulgaria’s position should be more for the fact that the debate on the global corporate tax is part of the wave of tax reform in the EU. Nozharov pointed out that the European tax wave will affect Bulgaria much more categorically compared to the effect of the second pillar of the global corporate tax.
The global tax and European tax reform
One of the expected effects for Bulgaria of the European tax reform, which aims to ensure fair taxation in the digital economy by the end of 2023, is the burden on companies with a digital fee to serve as the EU’s own resource. This measure will mainly affect service companies, especially small companies. Another burden will be related to the introduction of VAT on online trading platforms.
In Bulgaria, companies will also be affected by the forthcoming European requirement to publish where they pay their effective tax, which will affect companies that have tax offices in low-tax countries but operate in other countries for various economic and social reasons, Nozharov explained.
The impact of the global corporate tax on companies
The introduction of the global tax will not affect a serious number of companies in Bulgaria, because in our country there is not a large number of registered multinational companies, according to the economic adviser at BIA Shteryo Nozharov. He pointed out that the impact will be felt in the form of reduced tax revenues in “tax havens”, where there is a significant number of such registrations (Bulgaria is also among them) and these companies will be directed to the countries where they operate - the United States, Britain and other more developed economies.
The global tax opened the old topic of tax reforms in Bulgaria
According to Nozharov, the creation of a non-taxable tax base is a direction towards a progressive tax, which he said is not good for a number of reasons, but the main effect is that it will reduce budget revenues because such a measure will affect at least 20 percent of workers, who are on the minimum wage. This in turn will lead to a hidden increase in other taxes - for example, the maximum insurance income, which affects the business.
