A Land Tax in Bulgaria from 2007?

Capital Land Tax in Bulgaria after 2007? reported recently on the introduction of a ownership-based tax on Bulgarian properties.

Currently, property ownership where the property is agricultural land does not imply the payment of a tax during the course of ownership (but does imply payment on acquisition which may or may not be split with the former owner and potentially on disposal a contribution to which may be extracted by the future buyer). The position is of course different in relation to 'land' (in the sense of buildings) which are subject to local taxation, usually of a minimum nature.

Proposals of this type have been mooted by several previous governments, mainly with view to increasing the marketability of land but these have appeared politically too unappetising to gain sufficient buy-in from government. The current spur of interest seems connected to the likely difficulty of absorbing some of the € 2.8 billion which Bulgaria has been promised in EU agricultural funds over the next five years - and which require co-funding by the government. This has emboldened the cabinet in feeling that landowners will accept the small inconvenience of a tax against the mouth-watering goodness of the expected windfall.

The suggested justification for the tax however, is any dynamising effect on the domestic market in agricultural land it may bring. It appears that possibly as little as 15% of the country's 57,000 square kilometres of arable land (1.4 million acres) are currently under any form of cultivation. Agri-land is cheap compared to equally productive intra-EU land (several-fold cheaper), but it appears that most land-owners find the current costs of doing anything with their land higher than the opportunity cost of doing nothing. Imposing on them a minimal tax (with an accompanying cost of administration not just for the government but also for each passive landowner) is hoped to energise them sufficiently into action - renting or selling their otherwise idle farms, ideally. Rental or sale in turn is expected to move the land from the hands of non-users into those of potential users who value it highly. In a sense, the annoyance value which the Agriculture and Forestry Ministry (whose plan this currently is) is hoping to create to make wanton owners move may be offset by the annoyance and cost in administering the system added to the tax authorities (not to mention any dampening effect on the economy by virtue of the sapping of capital itself).

The impact of the tax on the purse of the individual owner is likely to be insignificant (mooted rates are € 0.05 - €0.25 per hectare (€0.13 - €0.65 per acre). It may mean the difference between hiring an accountant or not however for prospective small inward-investing landowners in Bulgaria who would not have otherwise had to consider such a cost.

Its constitutionality may however be subject to a challenge. Given that urban or industrial is not taxed in this way, questions of fairness (and, possibly conversely, questions of proportionality in comparison to other effective rates of taxation on properties in Bulgaria) may be brought up to challenge a law on this point. European acquis places no demand on Bulgaria to act in this way. In fact there is sufficient diversity in the choices of the current member states of the Union, and globally.