On September 23, the Bulgarian Ministry of Finance introduced a proposal for a one-time 33% tax on so-called excess profits, triggering an intense economic and political dispute over who will ultimately bear the financial burden. Designed to capture approximately 1.4 billion euros in additional state revenue for the 2027 budget, the measure targets six distinct sectors: banks, insurers, reinsurers, telecommunications companies, currency exchange bureaus, non-bank quick-credit firms, and food retailers operating at least five locations. According to the ministry’s impact assessment, the levy alone is projected to yield 1.035 billion euros, aimed at slashing a projected budget deficit of 5.7% of GDP.
The mechanism calculates each company’s average profit between 2020 and 2025, adds a 20% margin for “normal” return, and taxes any surplus at the steep 33% rate, with 90% payable in advance during 2027. While Deputy Minister of Finance Teodora Petkova defended the broader tax package by arguing that the measures ensure sustainable budget growth and target the shadow economy rather than punishing success, the proposal has encountered fierce pushback from banking executives, employers, the opposition, and the Bulgarian National Bank (BNB).
BNB Governor Warns Tax Hikes Burden Banking Operations
The most forceful institutional resistance came on September 25, when BNB Governor Dimitar Radev issued a detailed public statement warning that raising taxes carries a real economic price. Radev argued that labeling a levy as a tax on “excess profits” does not alter its fundamental nature as an increased tax burden on banking operations, which serves as the primary internal source of capital for lending and crisis absorption. Radev’s warnings mirror previous concerns raised by the European Central Bank regarding similar windfall taxes implemented elsewhere in Europe, such as in Spain.
Radev challenged the inclusion of 2020 as a baseline year, pointing out that the 2020 crisis yielded low bank profits that distort normal market recovery figures into an illusion of excess. According to the central bank’s analysis, institutions face three potential avenues to absorb the blow: more expensive or restricted credit for households and businesses, tighter deposit and lending conditions, or reduced shareholder dividends. Economists have split sharply over these projections, with Fiscal Council member and former Deputy Finance Minister Lyubomir Datzov telling the broadcast “Здравей, България” that actual collected revenues will likely fall far short of official forecasts, while, conversely, economist Vanya Григорова argued on the same broadcast that a 588% surge in bank profits justifies redistributing wealth to support public pensions and maternal benefits.
Weighing Deficit Reduction Against Market Stability
The fiscal debate reveals a deep philosophical divide over whether the state should prioritize spending cuts or revenue enhancement to fix structural deficits. Chief economist of the Institute for Market Economics Lъchezar Bogdanov criticized the 33% windfall tax on the broadcast “Здравей, България” as an unpredictable, emergency-style intervention that injects long-term instability into the tax environment. Bogdanov questioned the arbitrary nature of the 33% rate, which sectors should be included, and the criteria for determining “excess profit,” while warning against damaging the predictable investment climate that supports employment and economic growth.
Meanwhile, the European Central Bank has cautioned that using the financial sector as a quick fix for general fiscal shortfalls strips institutions of the capital buffers required to weather external shocks. Stripping away retained earnings forces credit institutions to tighten lending standards, ultimately shifting the cost directly onto regular taxpayers and non-financial enterprises through higher interest rates and restricted access to capital.
With the legislative package moving through the parliamentary process ahead of the 2027 fiscal year, the debate over the windfall tax highlights the precarious balancing act between plugging immediate state budget gaps and preserving the long-term solvency of the country’s financial architecture.
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