BNB: There is a risk of raising taxes

There is a risk of increasing direct taxes in Bulgaria, on the income of citizens and profits of companies, if in the coming years the budget does not return to the path of zero deficit.

This warning was addressed to the deputies by the Deputy Governor of the National Bank of Bulgaria Kalin Hristov, who presented the notes of the institution on the draft budget for 2021. The deputies of the finance, health and social policy committees approved on Thursday in the first reading the state budgets.

The more serious question is whether Bulgaria will return to fiscal consolidation, that is, to stable finances with zero deficits after overcoming the Covid crisis, was made clear in Hristov’s statement. According to him, this depends on two factors: whether the economic growth planned for 2021-2023 is achievable and whether the measures to support households and businesses, which are presented as temporary, will actually be canceled after the crisis. If they are not repealed, as planned, consolidation will be called into question, and this could lead to higher taxes on labor and capital, which now stand at 10%, Hristov’s words made clear.

“Increasing direct taxes on a contracting workforce in the country and low levels of private investment will not have a good effect on the economy,” he added. said the deputy governor of the BNB.

“The problem is that the consolidation and revitalization of the economy is based on a macroeconomic scenario, which is underestimated. If there is growth or decline in the economy, it affects budget revenues. In that sense, it is important to provide greater buffers, Furthermore, it is not clear whether the specific expenditures in the current budget are temporary or permanent, and if they are permanent, there is a risk that at some point they will have to be financed by tax policy, especially in the presence of such a low level of private investment. “, Kalin Hristov explained.

According to him, the central bank’s forecast for the economic recession this year is much more negative than the government’s: 5.5% compared to the government’s 3%. Meanwhile, the European Commission also released estimates of a 5.1% drop on Thursday.

The president of the budget committee Menda Stoyanova during the consideration of the three budgets. Photo: BGNES

The economist of the “Institute of Market Economy” Petar Ganev emphasized to the deputies that he does not believe that the anti-crisis measures of the Budget 2021, which are worth 3 billion BGN, will be canceled after that. According to him, the state will probably fight for 10 years to return the single VAT rate, after it was differentiated for certain goods and services such as food, beer, wine in restaurants, gyms, diapers and others. Ganev still does not believe that it is easy to eliminate or reduce benefits such as universal allowances for children, additional bonuses to state unit salaries, allowances of BGN 50 per month for retirees, etc.

Vanya Grigorova from Podkrepa announced that the union does not share the criticism that the budget is too social, money wasted, etc. She believes that the current tax system is not fair and there is nothing wrong with raising some taxes. However, according to Grigorova, the increase in social costs should go to those who really need it, and the additional funds for doctors’ salaries should be part of their permanent wages.

“This is a triple accounting budget. It has three elements: income, expenses and elections.” commented BSP MP Rumen Gechev.

Finance Minister Kiril Ananiev defended the budget, saying that without temporary measures due to the crisis the deficit was in the range of 3% – respectively 2% by 2020 and 1.5% of GDP by 2021. According to the European Commission based on In the one presented at the end of October, the budgets of the member states Bulgaria will have one of the lowest budget deficits for the crisis year 2020.