Pros and Cons of the Deposit Interest Retention of 10% in Bulgaria

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Pros and cons of the deposit interest retention of 10% in Bulgaria

In the end of 2012 year the Bulgarian government suggests a tax on the incomes of deposit interests. The concept of this idea is Bulgaria to equalize its economy with the model of development of powerful countries with strong economy. In this essay I will examine some of the advantages and disadvantages of this planned action.

To begin with, the deposit interest actually is a way of dealing with the inflation, not a way of earning money as most Bulgarians are used to consider. A proof of that are western countries which deposits interests are even lower than ours but the inflation also has a smaller index. The average deposit interest on existing “urgent deposits” in Bulgaria is 4.16-4.18% on a year basement. And for new fresh deposits, the interest is about 3% annual. This means deposit interests range from 3 and 4% for year.( Georgi Angelov, 2012). But according to National Statistical Institute, the inflation index also varies from 3 to 4% for the last 12 months. Therefore, the real earning from such an investment does not exist or is a very small amount.

However, main positive aspect of this step is rising the standard life in Bulgaria. All in all, more taxes mean more money for the government's treasury. It can result in terms of better health care system, more investments in education,boosting the pensions and state wages. It is calculated an income of 130 -140 millions annual and if used properly, they may improve our infrastructure as a whole, by making more parks, upgrading the roads, better the hospitals and etc.

Another point of this tax will appear in plenty of people denying themselves of deposits in banks at all. Hopefully, they will pursue another path for investing money which may turn out more appropriate. Bulgarians are poor “economically-educated” and do not know how and where to put their savings, in fact the bank is not always the best place.

On the other...
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