Банкеръ Daily


On May 15 We Celebrate the Day of Tax Freedom!

"When your child wins the first ice cream money, do the following:

 1. Before he has time to lick his ice cream, take it from him and bite 20 %.

 2. While the child will look at you surprised, bite another 30 %. Then give him the rest of the ice cream and explain that this is what the state does with all the money someone earns. And what will happen to every ice cream he buys for  themselves. And this % of a bite can be reduced by taking a bite to hand and asking for a report why it takes so much.

 If every parent does this, I hope a generation of people grow up in the country who will understand that the state does not have their own money - there is only taxpayer money. And that taxpayers not only can, but should watch government officials spend their money.”

Margaret Thatcher

This year's Tax Freedom Day was scheduled for May 15, and despite the crisis caused by the Chinese cough, the event set for the forecast date may come true.
This is because the date is calculated as the ratio of consolidated treasury revenues to gross domestic product.  And the expectations are

 that there could be a decline in GDP and revenue,

which may be approximately equal.  Therefore, at the moment there is no reason to believe that on May 15 we will not "celebrate". This was explained especially for The BANKER by Petar Ganev from the Institute for Market Economics.

His forecast so far is that the downfall in GDP will be about 5 percent. No revenue data yet. For March, the revenue was as expected, without a serious downward deviation.  There are suspicions that a collapse will be found in the summary for April, when VAT must be paid for March: we all know that in the second half of March

the business was quarantined and "intubated".

Until now, it was forecast  that the state treasury would receive a record BGN 46.8 billion in 2020.  On average for one calendar day, the Bulgarians had to make BGN 346 million, i.e. nearly 136 working days are needed to balance the state budget. Thus, May 15 turns out to be the day when citizens will symbolically stop working for the state and start working for themselves.

Bulgarians living in the country will again receive help from European taxpayers, who will "substitute" them for nearly eight days of work for the state. This mirrors the budgeted

 nearly BGN 2.7 billion in EU aid.

Thus, we, the taxpayers, will actually work for the state until May 7, and in the days until May 15, we will be "" by the European taxpayers.

Last year, the situation was similar, but the one-off costs for the fighters still led to a deficit of nearly BGN 1.2 billion on a cash basis. A balanced budget was planned for 2020 which happened for the first time since 2009

The most time this year is needed to fill VAT revenues - it will take 34 days.  Excise duties revenue requires at least 16 days, and for insurance - a month or so: 24 days- for social security and 9 days- for health insurance.

Revenues from income taxes will be collected in nearly 13 days, and from corporate taxes - in just over 8 days. We will work for another week in the name of state and municipal fees.

There has been a tendency in recent years that the days needed by Bulgarian taxpayers to complete "their" part of the budget become more and more, and the day of tax freedom - come later. This means that

the real tax burden in  BG is growing.

All this is happening against the background of spells to reduce the tax burden, in which Deputy Prime Minister Tomislav Donchev and Finance Minister Vladislav Goranov continue (allegedly) to believe.

The redistribution through the revenue part of the budget for 2020 was planned to reach 36.9%, which is slightly above the levels of 2019 and is actually its highest value for the last ten years.  The calculation distributes the tax burden on absolutely all Bulgarian citizens (including children, pensioners and government officials), as those working in the real sector bear the greatest tax burden - nearly 50 percent.  For them, Tax Freedom Day comes not before the end of June.

As it is known, at the end of last year the Minister of Finance insisted that

 municipalities  raise local taxes and fees.

The increase took place, although it was not a mass phenomenon. A few days ago, he made some corrections, saying: "In a crisis, changing taxes is not the right measure." According to him, in times of crisis it was not good to increase taxes ...

Yes, well, no.  Raising taxes was a gross mistake, the one Dyankov made 9 years ago. He, like Goranov, ordered the mayors to increase them and the consequences were a bunch of bankrupt municipalities, which

the state had to save urgently.

One measure, however, is traditionally overlooked by "bosses". It goes about the urgent request of the local government to keep 2% of the collected funds from the income taxes, which the municipalities collect on behalf of the NRA (i.e. the state), at the disposal of the local authorities.

According to IME data, two thirds of municipal budgets are filled by government transfers. The situation is different for different regions. For example, 60% of the budget of Sofia Municipality is formed by local taxes and fees (for obvious reasons), which allows it to be much more independent than other local governments. The own revenues of the regional centers make up only 40% of the municipal budgets, and in  smaller municipalities their share drops to one fifth. Everything else is "taken care of" by the state, most often –with   the inducements of the ruling party headquarters,

as the opposition believes.

Finally, at the end of last year, Goranov refused to release a "fiscal gift" to municipalities, arguing that budget surpluses were sufficient to co-finance municipalities. Now, in the context of an emerging deficit at the state level and a shortage of funds in the municipalities, the picture has changed.

It’s true, the state has paid the local authorities for social patronage, which became very popular in the state of emergency  but local governments are increasingly lagging behind with money for capital expenditures and transport.

It is most normal for them to have their own funds at their disposal, which they can spend appropriately and in a short time.

This motivated the Institute for Market Economics to launch an information campaign

 "Two percent in your municipality,"

which proposes the transfer of one-fifth of the revenues from income taxation to the municipalities. "Thus, 2% of the income of Bulgarian citizens, or about BGN 800 million for 2019, would remain in the municipal budgets," Ganev explained.

Dependence on income tax revenues will create an incentive for municipalities to make more efforts attracting investors in order to increase employment, and hence - to budget revenues. The additional benefits are twofold: reducing political dependence on the central government and opening up opportunities for civil society to participate in local economic policy-making.

The fact that the Ministry of Finance is hanging around and does not solve this problem now makes us a silly joke. Even if the government immediately embraced the idea that municipalities would be given more money t from their own revenues, this measure could begin to work from January 1, 2021. Because the parliament  has the last word which must be explicitly inscribed in the State Budget Act for the next year.

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