Банкеръ Weekly


Businesses Send Letter to Bulgaria's Govt

Bulgarian economy survived and even managed to grow in spite of everything that had happened recently. In 2013 alone it managed to cope with three Cabinets, permanent protests, strikes and hostile external environment. But this does not mean that the businesses feel well. On the contrary, every other manager or owner of a company claims to have worsening economic conditions and expected some actions to be taken to reverse the trend. The Bulgarian Industrial Association announced data days ago that made it clear that entrepreneurs evaluate negatively the actions of the executive power to address the crisis, and the government collecting the most criticism was the former one of Mr. Borissov (72%), followed by that of Oresharski (45% ) and the interim cabinet (31 %).

In fact, the businesses have long ago created a checklist of urgent measures to stimulate economic growth and facilitate small and medium enterprises. Bulgarian Chamber of Commerce and Industry (BCCI) even sent a kind of a Christmas letter to the prime minister, Cabinet members, advisers to the president and the parliamentary committees, which contained the desired number of recommendations for changes in country's legislation. Whether one will read them and execute a separate issue, but certainly most businessmen can easily claim that they have heard enough throughout 2013 and somehow deserve to be rewarded.

Beyond doubt is that under pressure from various structures and organizations measures have been taken that are controversial from the viewpoint of employers. The increase in the minimum wage, for example, without taking into account the level of labour productivity is one of them. The maximum insurable level was also raised without considering the impact on economic sectors. Against this background, the administrative reform is almost at a standstill. One of the prides of the current government - reducing the administrative burden, did not happen as companies wanted.

"Different unnecessary requirements aggravate the conditions of doing business in Bulgaria and it is high time they were abolished," said the President of BCCI Tsvetan Simeonov. According to him, the administrative burden that goes beyond the EU requirements should immediately be removed or reduced.

The truth is that the country continues to be at one of the first places in the world in terms of over-regulation for business and any actions taken by the government cannot put the country out of this unenviable position, said he. The reason is that the state administration has been reluctant to give up its control mechanisms and ways to exert pressure on companies. According to Deputy PM Daniela Bobeva there has been no ministry or government institution that gladly accepted the proposed package of measures to reduce regulatory regimes. "Everybody is trying to defend and justify the fees and other burdensome procedures imposed on businesses," she points out.

So far ministers prepared changes in over 30 laws and the review of yet another 100 regimes is pending, especially in the construction sector. All this, however, is a half-way done and is throwing dust in the eyes as serious reforms are postponed, experts commented. Entrepreneurs believe for example, that it would be much better if the now submitted annual tax returns of micro enterprises included, as separate sections, data reported for major statistical indicators, profit and loss account and condensed balance sheet. Now the process of a tax return submission requires piles of documents and statistical inquiries, which is a huge difficulty for companies with five to ten employees.

In order for the things to be run smoothly between the administration and the companies it is imperative that they introduce a model of integrated administrative services. In its data collection becomes official - both within the institution and between different administrative structures. Thus the senseless requirement to submit to government authorities documents which are already available in some of them will be avoided. These are, say, certificates of good standing or legal registration, which are publicly available in the Commercial Register and may be examined by the state officials. As a measure that will significantly alleviate about 90 % of the companies, since this is the proportion of micro-enterprises among all firms, the annual reports may be submitted to one state body - NRA where ex officio all information may be sent to the National Statistical Institute and the Registry Agency. The Cabinet led by PM Oresharski supposedly started working on this issue and even produced changes in the Administrative Code, but they are not moved as quickly as adjustments to the Law on the National Security Agency, for example.

The list sent by businesses to the government, enlists also a request for repealing the so-called dead regulatory requirements that are mandatory in nature, but in reality are not respected and not controlled by the state. And even if some control is implemented, it is rather a prerequisite for corruption practices or bribes. Such an example is the obligation of an employer to develop and adopt regulations for the internal work order under Art. 181 of the Labour Code, which is deemed completely unnecessary for micro-enterprises. For most small firms it is pointless to adopt internal rules for health and safety at the workplace.

The requirement of prior notification of the labour inspectorate for extensions in the working time also leads to a number of inconveniences. The problem is that the need for sending a longer time in the office often arises incidentally and there is never enough time to coordinate it with anyone. The same is the case with the obligation to coordinate with trade unions and employee representatives any introductions of part-time working schedules.

Micro and small companies insist also on repealing the provisions making companies keep a copy of the regulations for the internal work order available to the control authorities, as well as a list of employees by a company that provides temporary work, as well as documents related to the allocation of work time and the organisation of the company's operation. The motive is that because of all this bureaucracy the firms need to appoint an individual specifically to do this, but the contribution to business environment and the economy is zero.

Another part of the proposed changes are aimed at updating the legislation by repealing the paper records ( "bound, numbered" books) and implement and maintain this information electronically.

One of the most important aspirations, however, is the reduction of the corporate tax rate for sole proprietors from 15 to 10 percent. This will undoubtedly lead to a leveling of the approach to small traders with that to the big firms for which there is a tax relief for non-distribution of dividends.

To overcome all these and other weaknesses, of course, what is necessary in first place is desire, and a comprehensive review of relevant legislation and applicable procedures governing all economic initiatives.


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