EKIP– Expert Club for Economics and Politics A Different Opinion
Something has changed in the last year. No, it's not like we no longer hear about all the wonderful projects being built with the European Union's cohesion money – the political vocabulary is still full of highways, stadiums, halls and ribbons – but recently they have been joined by other words. And those that don't win local elections – taxes, debts, deficits, spiral of debt. Those that suggest that the "I will give" budget model, operating in a system with structural deficits, will have a relatively short and catastrophic life and we may be nearing its end.
The first herald of change surprised us exactly a year ago, in December 2014, when the Minister of Finance Vladislav Goranov came up with the surprising proposal to transfer the second pension pillar (mandatory private contributions to social security funds) to the National Social Security Institute – a kind of kitsch nationalization. Fortunately, after street protests and other forms of pressure, the idea was partially abandoned, although it is still not entirely clear what the finale of the saga will be. The explanation (unofficial) for Goranov’s move – a 2 billion leva annual deficit of the National Social Security Institute, after a 2.7 billion leva annual transfer from the budget. The government was looking for a quick, temporary solution to part of the structural deficit, of course at the cost of rolling back the stalled pension reform.
Tax wave
The pension nationalization incident paved the way for the rest of the fiscal ideas conceived by the second Borisov cabinet. An increase in the 10+2 flat tax, a weekend tax, a pension tax, an increase in social security contributions, an increase in the minimum wage (also a mechanism for increasing budget revenues), an increase in social security thresholds, new onerous rules for recognizing expenses, an increase in vignettes (road tax), an increase in excise duties (with some important exceptions), an increase in local taxes and, the icing on the cake, a tax on “junk food”. All this, before we even finished 2015.
The explanation for this seemingly sudden hunger for money from citizens and businesses should not be sought further than the republican budgets. These budgets, which brought the state debt from 15.3% in 2011 to over 30% in the coming 2016– and this in a scenario without costly shocks and crises. These numbers include only the visible obligations that we can recognize in the budget law, more debts lurk “off the books” in the NHIF, which owes 753.6 million leva to hospitals, in the state-owned energy companies, which have accumulated 4.59 billion leva in debts, not to mention the banking system, where the deposit guarantee fund is empty – any Corpbank scenario will be written directly as a debt to the taxpayer.
Racing with the truth
Unoptimized spending and unreformed systems are in competition with this cabinet. It is easy to spend European taxpayers' money, it is more difficult to burden Bulgarians. While Goranov manages to collect enough from the working people to consolidate the situation, Borisov will be able to absorb, build and redistribute. Those in power themselves realize that they are in a battle not with the debt itself, not with the deficits, but with the public awareness of the fact that we are in a debt spiral - because when you go bankrupt it is difficult to brag about what a wonderful repair you did on the staircase, with the money of your colleagues from Germany.
First of all, we need total transparency of budget expenditures because about 5,000,000 BGN are stolen annually in many different ways, including parasitism (bloated state administration, etc.)
that is, increasing taxes is mandatory, but first clarifying the economy and budget spending and then increasing taxes for the purpose of budget surpluses that are invested in precisely defined things - https://www.facebook.com/atanas.shalapatov/posts/1436573383287558
Why is it necessary to increase taxes?
The increase in taxes is mandatory, and more specifically the corporate tax, because most companies are foreign and the profit is exported instead of being invested in energy efficiency, etc. innovations, and if you want an increase in wages
, and , and Boyko Borisov realized that 27 billion were drained - http://www.blitz.bg/news/article/314769
I mean, I don't know how much he understood it or he's just repeating it like a parrot, but the facts are facts - the average level of corporate tax in the EU is 2.5 times higher than ours, and the personal income tax is 4 times higher.
5,000,000,000 BGN is the shadow economy - the budget is damaged ANNUALLY
5,000,000,000 BGN are thefts through budget expenditures again ANNUALLY
5,000,000,000 BGN flat tax damages the budget ANNUALLY
The competitiveness of our economy depends not so much on high wages, but on high energy, material, transport and other costs per unit of production, on poor management at the national and company level, on theft and corruption - according to Eurostat data for 2010, our country consumed 853,774 kg. oil equivalent per 1,000 euros of GDP. For comparison - the energy intensity of the Danish economy, for example, is 104.05 kg. oil equivalent per unit of GDP, Ireland (112,367 kg.) and Great Britain (115,469 kg.) - of course, this is not an accurate criterion because the financial "industry" is included in GDP.
More facts ''for the production of $1,000 worth of output in Bulgaria, 2.6 tons of conventional oil equivalent are consumed, in Estonia it is 0.4 tons, in Croatia - 0.5 tons, Latvia - 0.5 tons, Hungary - 0.6 tons, Poland - 0.7 tons, Czech Republic - 0.8 tons''
"According to IMF economists, when the income share of the richest 20% of the population in these countries increases by 1%, GDP growth increases by only 0.08% over the next 5 years. At the same time, a 1% increase in the income of the poorest 20% in these economies leads to a 0.38% increase in growth."
IT IS A QUESTION ABOUT AN ELEMENTARY MULTIPLIER
The profit belongs to the one who made it. If he wants to export it, if he wants to import it.
Increasing corporate taxes can only drive out companies already operating in Bulgaria or stop new ones from coming in. Then there will be no profit, no jobs, and no tax revenue (if that is even something we should be fighting for).