Bulgarian restaurant sector against taxing tips

The Bulgarian government’s proposal for a 10% tax on tips for waiters, taxi drivers and hairdressers has been strongly opposed by the restaurant industry and financiers and mocked by former prime minister Boyko Borisov.

In 2022, the restaurant industry collected at least €2.33 billion in revenue (2.5 % of the country’s GDP) and paid VAT on only €3.5 million, a study by Mediapool.bg showed on Thursday – though if the government’s proposal is adopted, the industry will be paying more into the system.

“In Italy, you know, it says 10% included tip in the bill. With a €100 bill, you pay €110. But this is no longer a tip. If you, the customer, decide to give some money, I don’t see why this thing should be taxed,” the chairman of the Association of Restaurants in Bulgaria, Richard Alibegov, said, as quoted by Nova TV.

In Bulgaria, VAT on restaurant prices is just 9%, which is below the normal VAT rate of 20%, meaning the government is losing out on a potential way to increase state coffers.

But questions about how to collect the tax have already been asked.

Finance expert Vladimir Sirakov, for instance, suggested that the “only option” to request customers to pay tips is “by card” if they are taxed.

But economist Krasen Stanchev refutes this, saying that because the tips are a gift from the customer to the waiter, they are not subject to taxes and should best be paid in cash.

The proposal aligns with the government’s attempts to increase budget revenues to keep the deficit below 3% – a requirement for the country to join the eurozone by January 2025.

On Sunday, Prime Minister Nikolai Denkov expressed his confidence that the parliament will accept the government’s proposed budget and reforms for next year.

(Krassen Nikolov | Euractiv.bg)

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