EKIP– Expert Club for Economics and Politics A Different Opinion
The management tradition of raising taxes under the radar has also reached local authorities. After Mayor Yordanka Fandakova hinted during the election campaign that they would not be raised in the capital, shortly after the start of her new term we were surprised with the news that GERB needs to collect another nearly 40 million leva from Sofia residents. This was done through additional taxation of cars and an increase in the tax on the acquisition of property for consideration from 2.5% to 3%.
The increase in car prices was justified by the new favorite chewing gum of the ruling class - ecology. Prime Minister Boyko Borisov informed us that the high mortality rate in the country is related to thermal power plants, and the Minister of Environment Neno Dimov suddenly believed in climate change and pointed to it as the reason for the water shortage in Pernik. Along the same rhetorical line, Ms. Fandakova will solve the pollution problems of Sofia through several tens of leva higher costs for drivers.
Like the so-called green ticket, the car tax will not have a significant environmental effect, at least because it cannot cause any particular restriction in the use of personal motor transport. It is impossible for the Sofia Municipality not to understand this, so the only explanation is that we are not actually talking about environmental goals, but about fiscal ones. Specifically, 20 million leva, which will be used for further repairs of Sofia's infrastructure.
If the issue of cars, both pollution and the larger problem of congestion were to be addressed, the path is different. Namely, by introducing order into the storage of cars by expanding paid parking zones and recalculating parking rates. The implicit subsidy for parking cars on streets and sidewalks artificially increases their number and stops private initiative in building new parking lots. At this stage, drivers with their own parking spaces or garages are disadvantaged at the expense of those who use municipal property year-round, free of charge. The effect of this is that the streets in general have no sidewalks and lack at least one lane, occupied by cars piled up on top of each other. Unfortunately, introducing order into municipal property is proving to be more difficult than collecting more money from Sofia residents.
The increase in the tax on real estate transactions to 3% is also completely unjustified.
The Sofia Municipality wants to have another 18 million leva available to spend, but at the same time, the growth in property prices in recent years is chasing the levels of 2008. This is due to the ECB's ultra-loose monetary policy, rising incomes and the popularity of Sofia as a place to work. Factors with no prospect of change, making buying a home particularly difficult for young families, for example. If the price of a property in Sofia is on average 200,000 leva, then a half-point increase in the tax is another 1,000 leva. expenses and another financial obstacle for new homeowners.
After years of letting conflicts between investors, owners, and residents in popular neighborhoods like Lozenets and Mladost escalate to the current situation of extreme exasperation, literally abandoning the role of mediator, today the municipality will reward itself with a thousand leva for each apartment sold.
The idea that Sofia needs an even bigger budget is debatable. In the same interview in which she hinted that there would be no tax increases in the capital, Yordanka Fandakova proudly stated that the city's budget has doubled in the last 10 years. Is Sofia twice as good today? Are the renovations of high quality, is public transport organized, is the city clean?
How did we decide it was better for politicians to spend more of our money?
Despite the tragic state of "Toplofikatsiya", which also continues to be an unresolved and practically left to run its course problem, the municipality has the opportunity to access fresh funds in the revenue side and to lighten the work in municipal enterprises through an original idea, first proposed by the municipal councilor and co-chairman of "Green Movement" Vladislav Panev. Namely, listing on the stock exchange part of the shares of "Sofia Properties", the markets and other companies, which are currently 100% municipal. New capital, funds for the municipal budget, private management in enterprises and a corruption brake all in one. Without burdening Sofia residents with more taxes.
The raising of taxes is presented by the administration and the majority in the Sofia Municipal Council as something that does not require explanations or debates, as the right of the rulers over the citizens. In fact, before we give even one more leva to the politicians, they must prove the need and the lack of alternative for yet another subsidy of their power.
