The Association of Banks in Bulgaria (ABB) in a statement published on its website on Thursday said that it does not support the government’s proposal to impose an additional tax on the banking sector. In its position, the Association calls for the measure to be rejected, arguing that it could undermine banks’ ability to finance the economy and adding that it is inconsistent with national and EU law.
According to ABB, there is no sufficient basis for concluding that banks are generating “excess profits”. A mechanical comparison with average nominal profits over an arbitrarily selected period does not, in itself, establish the existence of excess profits. Any justification for exceptional taxation would require an assessment of what share of the results is attributable to extraordinary circumstances and what share reflects growth in business activity, capital employed, risks assumed, investments made and increased efficiency, the statement says.
ABB also questions the choice of 2020–2025 as the reference period for the proposed additional tax, arguing that the inclusion of 2020 and 2021, years marked by a sharp contraction in economic activity as a result of the pandemic, is particularly difficult to justify. The approach fails to account for the full economic cycle: lost profitability during the pandemic was borne by the sector, while the subsequent recovery is now being treated as an extraordinary taxable result.
The association further warns that introducing an additional tax could have negative economic consequences by limiting banks’ capacity to extend credit and potentially leading to less favourable terms for customers. Ultimately, this could pose a risk to economic growth.
ABB argues that the proposal violates the principle of equal treatment and equal legal conditions for economic activity, as enshrined in Article 19(2) of the Constitution of the Republic of Bulgaria. In its view, the most significant constitutional issue stems from the selective nature of the proposed taxation.
“There is no clear common economic characteristic that would justify grouping together a bank, a supermarket, a telecommunications operator and an insurance company, while distinguishing them from a manufacturing company of the same size and with the same rate of profit growth,” the Association says. “The decisive criterion appears to be membership of a particular sector, rather than the presumed existence of excess profits.”
ABB stresses that additional taxation of the banking sector is not widespread across the European Union and is currently applied in only a limited number of member states. A key argument in those countries has been that lending rates have increased significantly more than deposit rates. According to ABB, these circumstances do not apply to Bulgaria, where lending rates remain among the lowest in Europe, providing favourable conditions for economic growth and consumers.
The Association says that on the basis of those economic and legal considerations it calls for the proposal to impose an additional tax on the banking sector to be rejected. “Such exceptional measures presuppose exceptional circumstances, which are not currently present. It is necessary to preserve the predictability of the tax environment, equal treatment of businesses, and banks’ ability to finance growth and support households and companies in future crises. Sustainable budget revenues should instead be pursued through consistent tax policy and the expansion of economic activity, based on a full assessment of the long-term consequences of each proposed measure.”
In a statement last week, Bulgarian National Bank (BNB) Governor Dimitar Radev warned that additional taxation of bank profits could result in more expensive or less accessible credit, constrain private investment and increase the cost of government borrowing.
At the beginning of this week, Deputy Prime Minister and Finance Minister Galab Donev told reporters that the BNB Governor was exceeding his remit by making political comments. The central bank subsequently issued a clarification stating that assessing the potential consequences of measures that could affect the banking sector, financial intermediation, lending conditions and financial stability forms part of BNB’s institutional functions and responsibilities. BNB added that it would not engage in political disputes.
Bulgarian Banks Oppose Proposed Additional Tax, Warn of Risks to Lending and Growth THE NEWS FROM BULGARIA – NEWS AGENCY 2009-2025 2026-10-01 14:01:59
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