Bulgaria has one of the earliest Tax Freedom Days in the EU. In 2018, Bulgarians will celebrate this day on 13th of May. It means that a Bulgarian employee has to work in total 132 days per year to pay all applicable taxes.
To break down the entire period of working for taxes, Bulgarians work 35 days for paying VAT, 19 days – excise taxes, 30 days – social security and health insurance contributions, 12 days – income tax, 7 days – corporate tax, and 8 days – state and local fees. According to the Bulgarian National Statistical Institute, the average gross monthly salary in Bulgaria is EUR 530. Bulgarians pay income tax at a flat rate of 10%.
What is Tax Freedom Day?
The Tax Freedom Day (also known as the Tax Liberation Day) refers to a day in a year when taxpayers stop working for the government and start working for themselves. In other words, all income derived by an employee from the Tax Freedom Day onwards goes straight to employee’s pocket.
How is the Tax Freedom Day calculated?
In order to identify a Tax Freedom Day, researches compare consolidated governmental revenue of a country with the GDP of that country. Afterwards, they make a calculation of the tax burden that is borne directly or indirectly by average employees, including social security contributions, payroll taxes, income tax, and VAT. The tax burden is calculated on the basis of the tax paid by employees in the respective country during the previous year.
In 2017, the three latest EU Tax Freedom Days belonged to Austria (18th of July), Belgium (27th of July), and France (29th of July). The employees in Cyprus, Malta, and Ireland enjoyed freedom from taxes earliest in the EU, namely, 27th of March, and 19th and 26th of April, respectively. The average EU employee pays 44,8% of tax, meaning that EUR 100 earned by an employee has an actual purchasing power of EUR 55,20. In the United States, employees start working for themselves on 23 of April.
In comparison with Belgium, Bulgarian taxpayers are in a significant advantage. The difference of almost three months arises out of the fact that Belgian employees carry one of the heaviest tax burdens in the EU, which equals to 56,7% tax on employment income, whereas Bulgarian employees have to pay around 23% tax in total (13% of income is attributed to social contributions). Belgian employers have to spend EUR 235 to retain EUR 100 purchasing power for an employee.
EU Tax Freedom Calendar
|Tax Freedom Day 2017|
|9 May||United Kingdom|
|20 June||Czech Republic|
|20 June||The Netherlands|