EKIP– Expert Club for Economics and Politics A Different Opinion
Two weeks ago, United Patriots deputies introduced a bill in the National Assembly aimed at restricting the sale and advertising of lottery tickets. It even reached the point where the Deputy Prime Minister for Economic Affairs of Bulgaria announced the introduction of a VAT on lotteries - something that is generally prohibited by the European Commission. In fact, something similar is happening in another sector of the economy.
The Ministry of Agriculture has issued a decree stating that dairy producers must decide whether to produce real dairy products or so-called imitation products, in which the moisture of vegetable fats is added. One way or the other. This is a regulation that not only the Bulgarian court has determined to be unconstitutional, but is also at odds with European legislation. Along similar lines, a bill proposing to increase the taxes paid by owners of more than one property is also being introduced into the parliamentary proceedings.
The conceptual problem is the way in which such structural changes are initiated in the regulatory framework of entire sectors of the economy, which are proposed for approval without absolutely any in-depth analysis and impact assessment, without any financial and economic arguments whatsoever. What would happen if tomorrow some politician decided that sugar leads to poverty and in order to limit its consumption, it was decided to impose some additional tax on products containing sugar?
A similar law was actually discussed in the previous parliament. What about quick loans? Salt? In a free and democratic society, the individual should have the freedom to do whatever he or she wants with money, as long as it does not harm the environment, regardless of all the positives and negatives of his or her decisions. It is not the function of the state to impose moral and cultural values on society, nor to decide how to have fun or what to consume. These are categories that are formed first of all at the family level. From an economic point of view, such unexpected and rapid changes in the legal framework create the following long-term problems.
Deterioration of the business climate
A key factor that has a positive impact on economic growth in a market economy is regulatory stability. This concept itself includes a wide range of definitions, one of the most important of which is the predictability of the regulatory and tax framework. When the state takes radical measures to change the regulatory and tax framework, it sends a negative signal to absolutely all economic partners.
The fact that the changes are having a negative impact on certain sectors at the moment is irrelevant, because the entire business is looking at the process in a negative way. Sectors that are characterized by a high degree of regulatory burden will be most negatively affected. The introduction of laws and regulations that profoundly change the framework of rules in entire sectors of the economy should only occur after a broad public debate that includes all affected parties and with serious analyses and these. Otherwise, a decline in investments, weaker growth, and job losses will follow.
Changing the legal framework without adequate justification
A serious problem with the proposed changes to the Gambling Act is that they lack any concrete economic reasoning. The main argument of the proponents is that lotteries create addiction in consumers. However, to prove this claim, at least some fact is needed - not just anecdotal observations and feelings. Another main reason for the proposed changes is that the sale of lottery tickets should only take place in places that have the appropriate license, as this could lead to fraud. Again, the proposal lacks information from the Gambling Commission on this and how many violations of the law have been identified.
The new regulation, which affects dairy processors, is based on the thesis that palm oil is harmful to health. Similar to the changes in the Gambling Act, there is a lack of assessment of the impact of the change in the regulatory framework and the resulting economic effects. All that is said is that the goal is to protect consumers from "harmful" palm oil. So why isn't it banned entirely, but the two products are separated? Again, there is no logic here.
Restriction of individual freedom
Any regulation that limits consumer choice or leads to higher prices for the final product is always a bad economic policy. Unfortunately, a significant portion of today's politicians do not know that final consumption is the main component of the gross domestic product formula. Purely logically, lawmakers should be extremely cautious when initiating legislative initiatives that have a negative impact on consumption.
Every citizen should have the freedom to consume those products that are considered to generate the highest utility for me, without the state restricting this right. Otherwise, we move from a market economy to a planned one, where the state determines what we consume, how much, and at what prices.
It is extremely important to emphasize that both sectors of the economy affected by the new restrictions and rules mentioned above are, in principle, heavily regulated. The institutions that monitor the implementation of the country's laws have not yet issued statements that any violations have been identified that would require the proposed changes. We encounter a moderate dose of elitism or lobbying from ordinary lawmakers.
Original publication: Money.bg
