Банкеръ Weekly

Briefs

LABOUR MINISTRY CALLS INFLATION FOR HELP

Two weeks ago, at a meeting with employers and trade unions, the Minister of Labour and Social Affairs Lydia Shuleva made it quite clear she would give up the idea for introduction of minimal rates of social provosions. In the next days to come this was also confirmed by the Deputy Social Minister Valeri Apostolov. The initially announced intentions of the Ministry were to be introduced minimal rates for social insurance on industrial branches and staff categories, the sums varying between BGN100 and BGN610. Shuleva is said to have retreated from her initial positions because of legal problems - Article 60 of the Constitution reads that taxes are payable on real incomes (although it's doubted whether this text is applicable on insurances as well).However, last negotiation results do not mean that the insurance burden won't be increased. At the meeting was launched the idea administratively imposed insurance rates to be substituted by collective labour contracts which will have the same effect on salaries. The Labour Code reads that in case of signed collective labour agreement at branch level, the Social Ministry can apply it as obligatory for all firms of the sector. So far no such case has been recorded and this is highly improbable to happen in the future as well. The so-called social partners do not believe that agreements can be reached in more than a couple of industrial branches. And even this will hardly happen by July 17 - the deadline appointed by Minister Shuleva.Amendment of the Labour Code seems as a much more probable option. The government could be entitled to appoint minimum work salary on the basis of economic activities and staff categories. This means that in case the initial branch and professional groups are preserved, we will have 54 minimal salaries, instead of the present minimum salary of BGN100.This is the favourite option of Deputy Social Minister Valeri Apostolov.If the insurable income's increase is imposed by the minimum salary, but not by rates, then government can draw a number of other advantages. On the first hand, payments will be made on real income as employers will be obliged to pay the higher minimum salaries and no legal vaguenesses will ever appear. On the other hand, tax incomes will also be raised. Even two months ago Deputy Finance Minister Gati Al Dzheburi approved of Minister Shuleva's idea and wanted to apply the same rates as minimum basis on which taxes to be paid. However, this proposal was obviously contradictory to the Constitution, so it was neglected. Nevertheless, if amendment of the Labour Code is enforced, then the Finance Ministry will also have its gain. Naturally, business will suffer rather seriously from the new invention as then apart from higher insurances, employers will also have to pay higher salaries. So far it is not known whether the new minimal salaries will be the same as the offered insurance rates. But with increase of such scale, some enterprises in the country's poorest regions will be burdened with almost unbearable labour expenses. If the Ministry stands for its position, then the incoming double increase of the minimum salary poses at serious risk all enterprises which count on cheap labour. They will hardly be able to preserve the present self-cost of their production. The Social Ministry reports that 65% of the Bulgarian firms do hide provisions. It can be easily predicted that the concerned companies will have two options for counter-reaction. The first one is obvious - moving from the grey into the black economy. The second one is putting up prices which will ruin the effect of the increased minimum salaries. In other words, the result will be the same, yet achieved at much higher level - employers will be able both to cover the minimum salary and to hide real incomes. It is well-known that the grey sector is much more distincly notable in a number of branches which count on tax evasion as one of the necessary rules for successful competitiveness. It seems most logical both salaries and prices in these sectors to go up by the same rate. This, however, will hardly be of any use for anyone, let alone the sacred financial stability.

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