site.btaExpert Calls for Restart of Fiscal Decentralization

Fiscal Council (FC) member Desislava Kalcheva called for a restart of fiscal decentralization in Bulgaria during a public presentation of her monograph on the subject, the FC reported on Monday.

The monograph is titled "Fiscal Decentralization and Municipal Tax Autonomy - Opportunities for Restarting the Process in Bulgaria". It examines centralization tendencies, presents a survey examining the attitudes of Bulgarian municipalities towards current tax policy, and suggests ways to boost local tax revenues. The study draws on examples from international experience, including the updating of property tax assessments in Denmark and Ireland, the tax revenue-sharing mechanism used in Czechia, and a broader overview of the issue across the European Union.

Among the conclusions of the monograph is that fiscal decentralization in Bulgaria has effectively been suspended and that the process needs to be restarted. It notes that after the progress recorded in 2007-2008, the process gradually slowed, with no subsequent meaningful measures taken to expand it further. The study also points out that the share of municipalities' own-source revenues is very low, accounting for 5% of public revenues and only 2% of GDP, while municipalities remain highly dependent on transfers and the state budget.

According to the survey of municipalities included in the monograph, the main proposals for increasing revenues are the introduction of annual or periodic updates of property tax assessments to levels closer to market values; the sharing of national taxes, particularly personal income tax, with proposals ranging from 30% to 70% in favour of municipalities, as well as a share of corporate tax revenues; and the taxation of agricultural land (BGN 20-30 per hectare or a differentiated rate of 0.5%-2%), which is considered particularly important for rural municipalities.