May 15 Is Bulgaria's Tax Freedom Day in 2020

May 15 Is Bulgaria's Tax Freedom Day in 2020

ESD 15:51:01 14-05-2020

May 15 Is Bulgaria's
Tax Freedom Day in

Sofia, May 14 (BTA) - May 15 is Tax Freedom Day in Bulgaria, the day on which people have theoretically settled their tax bills and can stop working for the government and start working for themselves, the Institute for Market Economics (IME) said Thursday. This is also the day on which the Exchequer would have been filled if everything produced by people was immediately paid to the government.

The consolidated revenues officially set in the budget are 46.8 billion leva, which means that this year Bulgarians will work 136 days for the Exchequer, the IME experts say.

According to the European Commission's latest forecast, the Bulgarian economy will shrink by 7.2 per cent in 2020. The impact on the economy and the increase in budget spending mean a record-setting redistribution through the public sector: consolidated expenditures are expected to reach 42 per cent of GDP. For many years, that redistribution was around 40 per cent of GDP, which proved to be a healthy ceiling for state expenditures and kept a rein on the fiscal policy, the IME experts note.

According to them, the State's stronger role could be explained with the state of emergency in Bulgaria, but it is very dangerous to tax payers. The COVID-19 crisis should not give reason to push back the private sector and increase the State's role in the economy. On the contrary, now is the time to give more freedom to entrepreneurs, who can take the economy out of the difficult situation, the experts argue.

Even before the appearance of COVID-19, the Bulgarian tax payer was gradually being burdened further by the State. For example, in 2017 and 2018 pension contributions were increased, and in 2019 the maximum insurance threshold was raised. This year began with an increase in local taxes and fees throughout the country. During the state of emergency from March 13 to May 13, certain steps to ease tax payments were taken - for example a discount on local taxes - but that has not changed the situation significantly, the IME experts say.

The last days have seen talks about real measures to reduce taxes: introduction of differentiated VAT rates for restaurants and books. However, tax freedom gains the most from horizontal measures that are open to everyone, and not just to separate businesses or individuals. A much better option would be not to differentiate VAT rates but, for example, to increase the threshold for VAT registration. That would give a breath of fresh air to all small companies and would not discriminate certain sectors, the IME economists argue.

Regardless of the measures, insecurity will continue to play a lead role until the end of 2020. A possible second wave of COVID-19 would seriously change the economic forecasts and signfiicantly increase the budget deficit. The redistribution through the budget also depends on the normalization or complication of the epidemiological situation. However, Tax Freedom Day is a reminder that both in good and bad years, all public policies depend on tax payers' work, the IME said.

Source: Sofia