Bread Prices Skyrocket as 20% VAT Resumes: A New Year’s Setback
In a blow to consumers’ budgets, the new year has brought a significant increase in bread and bakery product prices. Following the removal of the zero VAT rate, prices have surged by a minimum of 20% in stores nationwide.
The Ministry of Finance projects that the reintroduction of the 20% VAT will bring between 400 and 500 million levs into the budget by the end of the year. However, both producers and consumers have voiced their opposition to the tax hike, citing affordability concerns.
Despite the reimposition of VAT, data from the National Statistical Institute shows that between 2020 and 2023, when the 20% VAT was absent, the price of a kilogram of "Dobrudja" bread increased by an average of 80 stotinki.
Days after the VAT rate for bread and flour was restored, prices of bakery products have noticeably jumped. Bожурка Желева, owner of a chain of bakeries, commented, "We offer 16 types of bread. Most have increased by 50-70 stotinki, which is a significant burden for people with low and middle incomes. I also feel the impact; I buy bread every day. Bread is a staple, and it should maintain the zero VAT rate."
Producers warn of further price increases to compensate for higher labor costs and utility bills. Alexandar Yosifov, a baker, predicts, "We’ll see an increase of more than 20%, possibly around 30%, on bread, snacks, and other flour-based products. This will put pressure on consumers, as bread is a essential household item."
In stores across the country, price increases vary. In a major capital chain, "Dobrudja" bread costs 2.39 levs, while in Montana, it’s 1.90 levs, set to rise to 2.20 levs by Monday. In Varna, "Bulgaria" bread is priced at 1.69 levs.
To make bread prices more affordable, producers urge the return of the zero VAT rate. Yosifov argues, "Bread should be considered a social commodity, and its VAT rate should remain zero." However, economists like Petr Ganov from the Institute for Market Economics contend that the 20% VAT is necessary to fill budget gaps.
As the new year gets underway, consumers face a challenging start with the sharp increase in bread prices. The debate over VAT rates and their impact on essential goods continues, with no clear resolution in sight.
