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Fuel taxes to grow slightly above baseline projections.

Fuel taxes to grow slightly above baseline projections. The leaders of the three ruling parties decided yesterday to raise the excise taxes for car fuels slightly above the initial plan approved the cabinet for next year. The change was proposed by the finance ministry after complains of the second ruling partner NMS-II that the budget of the defence ministry was cut to 2.3% of GDP. The ministry projects that the new excise tax would raise the line fiscal revenues by BGN 51mn (0.1% of GDP) and would satisfy the demand of NMS-II for raising defence expenditures to 2.4-2.5% of GDP. The overall effect on retail fuel prices would be in the range of 6-7% instead of the initially estimated 3-4%. The finance ministry explains that the new tax proposal moves country's commitments to the EU ahead of schedule as earlier pledged hikes for 2007 and 2008 will be concentrated in the first year. This could eventually help follow-up efforts for meeting the price criterion for joining the eurozone, as the reference period for evaluating the country's inflation would most likely start in 2008.

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