Unjustified, unlawful and downright absurd. This is how the mining industry described the proposed amendments to the Underground Mineral Resources Act (URA), with which the Ministry of Finance will try to cover part of the bloated budget costs for 2025. The industry opposed the proposals and key companies stopped working for a day in mid-December in support of their workers' protest outside the Council of Ministers building where the tripartite meeting of state, companies and workers' representatives was held.
In short, the new levy for the sector would mean a virtually new, third tax that would double payments to the state at the expense of investment in innovation and modernisation. This could lead to the postponement of projects and generally put off potential investors.
Within days the story took a turn and on Friday, 13 December, Finance Minister Lyudmila Petkova announced that the tax was being replaced by a one-off fee, but failed to give any concrete information.
The calculations of the Ministry of Finance
In anticipation of the budget proposal for 2025 of the government, the Finance Ministry pushed forward changes to the sectoral law to introduce an additional tax to be levied on the value of extracted minerals, regardless of whether a profit is made after processing. The initial proposed rates were 15% for ores and 8% for non-metallic minerals and fuels.
At first, plans were for the measure to be permanent, meaning it would not be a one-off act to tie up the budget for 2025, with the expected revenue estimated at BGN 900 million for each of the next four years. By comparison, according to the Bulgarian Chamber of Mining and Geology (BMGC), the mining industry contributes BGN 800 million to the state budget each year. In addition to the standard corporate tax on profits, companies currently pay annual concession fees, the amount of which depends on the profitability of mining.
The ministry claimed it sees the new tax as an opportunity to |overcome barriers" to the increase in concession fees, which are set by a regulation to the law and were updated for the last time in 2007, but remain a favourite election slogan for many politicians. According to Finance Minister Lyudmila Petkova, the new law will achieve "a fairer and more up-to-date level of payment for the right to extract subsoil."
However, the sector interprets the idea differently. "The state presents the lack of justification for increasing the current levels of concession payments provided for in the UPR as "barriers to updating concession payments," the BMGC wrote in a public statement.
In the end, the Ministry of Finance changed the tune and decided that the extractive sector would not be subject to a new tax, but would instead have to pay a one-off fee in 2025. It would be recognised as an expense for tax purposes. The change was announced on 13 December at a hearing of interim Finance Minister Lyudmila Petkova in parliament. Exactly what this fee will be and what its amount will be is not yet clear. But Petkova also hinted at a reopening of the regulation on concession fees, probably in order to raise them.
Companies oppose the move
According to one of the giants in the sector, copper producer Asarel-Medet, if adopted, the proposal would prove devastating for the mining industry. "The company will be forced to suspend all its investments and innovations, as well as to revise its well-established social policy for the workers and for the development of the municipality," CEO Nikolay Peltekov said in an official position paper. "The drastic new tax will have a large social cost and will not have the desired economic effects. On the contrary, it will bring investment in mining production to a halt, thousands of jobs will be lost and the development of a strategic sector for the national economy will be threatened," he wrote.
Despite all these risks, not only has the project not been discussed with the industry, but it seems that the finance ministry has tried to avoid such a discussion. "We first saw the changes after they were published," the BMGC told Capital weekly. "We requested a meeting with the finance minister. There was a month of silence. During that month we wrote letters, we called. We have always sought dialogue with every government institution, this time there was none. Neither the Finance Ministry nor the Council of Ministers took our demands seriously," Ivan Mitev from BMGC added.
Against this backdrop, the finance minister's comments after 11 December's tripartite council meeting sounded strange. "Regarding the tax on underground wealth, I got the impression that there are no problems, but this does not mean that the talks cannot continue and that the measures do not hinder business and do not create social tensions," Petkova said, as quoted by BTA. It turns out, however, that there are problems and the talks have not started at all.
Unjustified, unlawful and downright absurd. This is how the mining industry described the proposed amendments to the Underground Mineral Resources Act (URA), with which the Ministry of Finance will try to cover part of the bloated budget costs for 2025. The industry opposed the proposals and key companies stopped working for a day in mid-December in support of their workers' protest outside the Council of Ministers building where the tripartite meeting of state, companies and workers' representatives was held.
In short, the new levy for the sector would mean a virtually new, third tax that would double payments to the state at the expense of investment in innovation and modernisation. This could lead to the postponement of projects and generally put off potential investors.
