The Chairman of the Confederation of Employers and Industrialists in Bulgaria Kiril Domuschiev with a new wave of criticism of the tax policy of the ruling party.
A not-so-short answer to comrade Stoynev from the BSP:
The MP from the BSP Dragomir Stoynev justifies the doubling of the dividend tax with the fight against the shadow economy. I want to tell him 3 things:
1. A statistically significant correlation between dividend tax and the levels of the shadow economy does not exist in the countries of Eastern Europe, which share similar problems in the fight against it and the reasons for its emergence. Comparisons with France or Germany for this phenomenon are irrelevant – when the BSP creates institutions like the French and German ones, then they should call. That is, what MP Stoynev said is completely false as data – not to use a stronger word.
2. Purely logically in real life it is also false. The income of the shadow economy either has no official origin with an invoice or goes through huge remuneration for executive directors, which they then withdraw - this is how between 10% and 11% taxes and social security are paid, and not 10% + 5% profit and dividend tax. This is clearly visible from the National Revenue Agency and is simply a matter of wanting to fight it. That is, what MP Stoynev said is also logically wrong.
3. The estimated revenue from dividend tax for 2025 is planned for 174 million leva - proof of how young Bulgarian capitalism is and how relatively weak Bulgarian companies still are. Even if you fulfill the phantasmagoria for 2026 of 340 million euros (who are you kidding with that number - it is more likely that they will even decrease below those of 2025!!), you will achieve almost nothing to fill the deficit, which will probably be over 8 billion leva.
And in fact, Rumen Ovcharov himself said it clearly yesterday - BSP reduced taxes in order to lighten the economy and has proven to have succeeded, and now he is trying to raise them with the same argument!
The increase in dividend tax in Bulgaria, however, will have the following proven harmful consequences:
1. It will drastically reduce the desire of entrepreneurs to create new start-ups by withdrawing funds from already successful businesses and investing them in innovations and risky ventures. Wonderful new companies like Endurosat may not be created at all, since the “angel“ investors in them they would prefer to simply make additional investments in their existing businesses, rather than withdraw the dividend and take a risk on something new. For young people this will be devastating, considering the lack of large VC funds in our country.
2. This “blocking“ of profits in old companies and killing innovation is the reason why Europe is being crushed by the vice of the USA and China. In the post-war period, we maintained and protected our legacy industries and “forgot“ to take risks in innovation with the profits from them. For example, TESLA, founded 22 years ago, has a market capitalization 3 TIMES higher than the entire European automotive sector and a higher capitalization than the entire global automotive sector.
3. In today's global and digital world, Bulgaria is not competing only with its neighbors from Romania or Poland, but with the whole world, and we must learn from the mistakes of the big ones and not repeat them. In 2009, the average American produced 1.4 times more than the average German (the industrial leader of the EU) - this year the number will be 1.6 times. We need to understand why we are lagging behind in innovation and efficiency and jump the trap - and not repeat the mistake and fall behind Western Europe even faster. Because Western Europe has accumulated capital from 200-300 years of capitalism, and Bulgaria cannot accumulate even 70 years.
4. By reducing the motivation to create new enterprises and foreign investments, dividend tax revenues may even decrease - large existing businesses will reinvest profits, and new greenfield investments simply will not be made. Then unions and politicians will focus on raising the next tax. The BSP must understand that Bulgaria simply has not accumulated the capital of Western Europe, which would give it a thick enough buffer for mistakes. Radically left-wing policies in our country do not only create missed opportunities, but directly destroy welfare and lead to debts, inflation and a Romanian scenario.
*For the graph, I used Elon Musk's artificial intelligence, instead of assigning a team of lawyers and economists to work half a day. But the state administration has not heard of artificial intelligence, otherwise it could have been 50% smaller."