The easiest thing is to raise taxes. But in this way Bulgaria will fall into the economic swamp in which many of our main trading partners in Western Europe are. This was said in the program “This Saturday“ on bTV by the financier and former Minister of Finance Milen Velchev.
The government announced that it is the one that “will have to drink the bitter cup” because of the financial situation of the state. The opposition called for a stop to the panic and “whoever cannot, should leave and give to someone who can”.
“The situation with money in the state is bad enough. It is not catastrophic, but it imposes many of the measures that Deputy Prime Minister and Minister of Finance Galab Donev refers to. But we do not hear enough specifics. I hope to hear it in the next month“, explained Velchev.
In his words, freezing and removing the mechanisms do not mean the same thing. “Because by definition, if these automatic mechanisms continue to exist, this means that the spiral will continue to unfold and incomes will continue to grow faster than reason dictates. So we can certainly welcome the request to remove these mechanisms“.
“Their removal does not mean an automatic freezing of incomes, because the government remains able to assess which incomes and by how much it is appropriate to increase each year“, commented Velchev.
According to the financier, cost-saving measures are certainly necessary. “The problems in the budget, which are truly deep, are not created by insufficient revenues and do not come from excessively low taxes. With the same taxes and with similar collection rates, the state managed to live relatively comfortably 20 or 25 years ago and not only not exceed a 3% deficit, but on the contrary - to generate a balanced budget and a surplus“.
“With the same taxes and the same revenues, the problem is in the expenses. In recent years, especially in the last 5, many of the revenues in the budget sphere have grown so disproportionately that they have outpaced the growth of the economy at great rates“, he commented.
According to him, we should not listen uncritically to everything that our partners from the European Commission bequeath to us. This includes progressive taxation.
“The easiest thing, at first glance, is to raise taxes. The consequences, however, will be the same as we see in Western Europe - lack of growth, lack of dynamics.
Bulgaria is developing well economically against this background and is growing faster every year than Western Europe. We do not want this, although not very high, growth to decrease even more and for us to fall into the economic swamp in which many of our main trading partners are“, Velchev pointed out.
Velchev commented that even in the European Commission, although they are not elected by the voters, they sometimes like to behave like politicians. “And they want to be popular. They will not say specifically: “Reduce COVID supplements“ or “Reduce the administration by 10%“, which should be done. It is easier for them to say: “Let's tax even more those who already pay taxes“.
“The European Commission probably really does not have a very complete view of the state of finances. Their statement itself emphasizes that they were not informed about everything that is happening in the public sector. And with the not-so-perfect information, they came to a calculation that the budget will end up with a deficit of around minus 4%“, he explained.
“I would rather believe our government, but I suspect that the truth, if not in the middle, is somewhere between minus 4% and 7.4%. Maybe closer to the forecasts of the Minister of Finance“, Velchev added.