Банкеръ Weekly

Briefs

THE STATE SHOULD WITHDRAW FROM THE ECONOMY

Dimiter Chobanov, Co-author of the Economic Platform of the United Democratic Forces, to the BANKER weeklyDimiter Chobanov is a senior economist in the Institute for Market Economy and a part-time assistant in International Finances at the University for National and World Economy (Sofia). He was a trainee in the Bulgarian National Bank (BNB) and in the International Monetary Fund representative office in Bulgaria. He also took part in projects of the World Bank as an individual consultant. He ranks second in the ticket of the United Democratic Forces (UDF) in Yambol.Mr. Chobanov, is it possible for Bulgaria to become a small economic tiger in the Balkans?- It is possible for every country to become not just a small tiger, but a real economic one. That involves attraction of foreign investments and encouragement of the local ones which at least for the present are of greater amount. There are examples in the world economic history of a continuous economic growth by some 10% a year. It happened in Eire which reached and even outstripped significantly the average income in the European Union in just 20 years. Bulgaria can be successful in that direction, too, if it only conducts the right policy.Does the UDF have its own recipe about how to achieve an economic miracle? What are the differences from the other parties?- As I said, the UDF are the ones who count on expanding the individual freedom most. Our platform stipulates measures of this kind in several directions. First, regarding the taxes - they help the State take away what people produce and reducing them will stimulate the economic activities. The lower insurance payments are included here, too. The second step is alleviating the licence and permission regimes which are a huge obstacle for doing business and increase the amount of expenses. The third step is reforming the judicial system and introducing private bailiffs who will help to better protect the right of ownership and will guarantee the implementation of agreements.UDF's platform is typical of a right-wing coalition and is quite different from that of the Bulgarian Socialist Party (BSP), for example, which members rely on left ideas such as raising taxes for people with higher income and significantly increasing the state expenditures. According to the calculations that we've made, in order for the BSP to keep its promises state expenses should grow by BGN14BN at least in the next four years and reach at least 45% of the gross domestic product (GDP). And that's only valid for the promises that can be measured. On the other hand, we propose significant reduction of the redistribution through the budget to 30-35% of the GDP which will strongly stimulate the whole economy.How will the blue tax system look after the elections?- The main amendments will be the following: an average 5% decrease of tax on personal incomes; a lower number of tax rates (which practically means a reduction by half for most people, and a cut-down of the insurance burden by transferring 50% of the employer's instalment to the State. The lower taxation of labour will raise by about BGN1,000 annually the incomes of a family, two members of which work and get an average salary. Moreover, we'll bring down the profit tax to 10% and will eliminate the tax on dividends, which will practically reduce the taxation of corporate proceeds by half. What resources will be used to cover the resulting lower revenues from taxes?- UDF's platform projects the State's withdrawal from the economy. This means that the State will be freed from activities which are not typical of it in the sphere of transport and telecommunications, power engineering, central heating, and water supply, and from the management of property as well. The State will fulfil in the entire volume only the activities concerning jurisdiction, security, defence and foreign policy. How much exactly will insurances (which are currently 42.7%) go down if the UDF comes to power?- Insurances are presently quite high and are perceived by business as the most distorting tax. Therefore, their quick and significant decrease should be the key issue in any pre-election platform. Naturally, the UDF are aware of their responsibilities that direction. That is why we project that within a period of ten years the State should undertake half of the insurances instalments paid by employer, which are currently 70% of the entire amount, i.e. the planned reduction will be practically by one third.Do you believe that the next government, whatever it is, will be able to cut down the distance between Bulgarian and European incomes?- Incomes in Bulgaria are really quite far behind those in the EU and no government could bring them close enough to the Europe ones within four years. But, UDF's ruling would do that to the greatest possible extent as its platform projects measures which are the most appropriate to the Bulgarian citizens. If the annual economic growth is 8-10% and the personal incomes go up by some 10% a year, Bulgarians would be about one and a half times richer than now. And that will give them more confidence in the future. But it should be born in mind that in order to get the utmost benefits from this policy of maximum economic freedom, it is to be applied not only during a single mandate.

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