The BSP proposes 11 measures for reform of tax and social security legislation. The draft Vision was adopted unanimously by the members of the National Council at its regular meeting on Sunday. The document entitled "Justice, Statehood, Development" was prepared by the Councils on Finance and on Economy, Industry and Innovation to the National Council of the BSP. The vision was presented by Ivan Takov, Deputy Chairman of the Bulgarian Socialist Party for Public Policies, the party's press center reported.
"In conditions of global uncertainty, aggravation of trade disputes and the risk of recession in our main export markets, Bulgaria is facing many challenges that threaten the country's fiscal sustainability. An additional factor for this is the lack of domestic political stability and the accumulated social tension in connection with the upcoming change of the national currency, its authors note in the document. - In recent years, the impossibility of maintaining the macroeconomic position and fiscal balance while maintaining the currently operating tax and social security model has become increasingly visible. Moreover, it is at the root of the ever-growing socio-economic inequalities that undermine the ties between different groups in society. For nearly 10 years, Bulgaria has been the EU country with the highest levels of inequality, with the Gini coefficient for 2024 at 38.4, compared to an average of 29.4 for the 27 member states. Last year, nearly a third of Bulgarians (30.3%) lived at risk of poverty and social exclusion, compared to an average of 21% for the EU-27.
They add that Bulgaria's entry into the eurozone presents our country with additional challenges. "Comparative studies show that the adoption of the euro affects different social groups differently - lower-income groups are likely to lose their purchasing power. The risk of rising inflation also mainly affects these groups, the authors of the Vision analyze. - The convergence report makes it clear that the ECB has concerns about the rapid rate of wage growth in our country. If we add to this the concerns about rising inflation, the probability of slowing down wage growth is high. Moreover, the worsening trade balance and the negative current account balance will most likely lead to additional arguments for withholding labor income in order to maintain some competitiveness. Such a situation would make easier access to credit too risky".
The socialists express concern that in the context of the extremely worrying dynamics of social inequalities, there are real risks that social opposition will increase, and that increasingly large groups of the population will feel socially and economically depressed. "This would be detrimental both to trust in our political system and to trust in the EU. Fairer redistribution (through more responsibility from capital) and more social transfers are key tools for minimizing a large part of the aforementioned risks, they argue. - The Bulgarian Socialist Party and the parties of the "BSP-United Left" coalition support policies for long-term fiscal sustainability. We believe that solving conjunctural problems should not be at the expense of future generations and we oppose further accumulation of public debt when it is not related to productive investments. We do not support the practice of seeking solutions only in the presence of deficits in public systems.
Driven by the need for stability, social security and development prospects for current and future generations, the socialists propose a number of changes that would serve as a model for political and public consensus for the fiscal and macroeconomic policies of the state in the coming decades. The main principles underlying their proposals are the following:
Fairness - balanced taxation of business and personal income, in line with the cost of living, which should first and foremost guarantee internal cohesion between different social groups, accelerated convergence with the standard of living in other EU member states, and a significant reduction in poverty and inequality.
Statehood - ensuring sustainable financing of key public policies, completely independent of external factors (e.g. EU funds), without affecting the incomes of the most vulnerable groups of the population and those employed in the public sector.
Development - promoting public investments and implementing strategic projects, both at the national level and in municipalities, to ensure modern transport, energy, utility and communication infrastructure. Providing prerequisites for reducing the huge differences in the socio-economic development of individual regions.
To achieve the described goals, the Bulgarian Socialist Party and its coalition partners propose a comprehensive reform of the tax and social security system, which includes the following measures:
1. Increasing the maximum amount of expenditure under the consolidated fiscal program under Art. 28, para. 1 of the Public Finance Act from 40 to 45% of GDP. This measure alone would lead to new opportunities for financing public policies in the amount of 5.5 billion euros. The average percentage of government expenditure as a share of GDP in the EU is 49.
2. Promoting small and medium-sized businesses and competition by introducing a progressive corporate tax scale:
Maintaining the 10% rate for companies with declared profits of up to 1 million euros;
A rate of 12.5% for companies with declared profits of 1 to 5 million euros;
A rate of 15% for companies with declared profits over 5 million euros.
3. Introducing an “excess profit“ tax, through amendments to the Corporate Income Tax Act;
4. Increasing the dividend tax from 5 to 10%. This measure will have a strong positive effect on budget revenues and will be an incentive for company owners to declare a larger amount of income from work, respectively to insure themselves on this income;
5. Increase in gambling taxes from 15 to 20%;
6. Introduction of a tax on agricultural land. (only farms over 100 acres are subject to taxation)
7. Increase in the threshold for VAT registration from 100,000 leva to 85,000 euro turnover. This measure will support about 35,000 micro-enterprises;
8. Increase in concession fees, through the relevant legal changes;
9. Reducing inequalities and the number of working poor by introducing progressive income taxation:
Introducing a non-taxable minimum in the amount of the minimum wage established for the country, which will lead to an increase in the net disposable income of nearly 1 million workers with the lowest incomes;
10. Increasing tax expenditures for tax breaks for children and children with disabilities (Article 22c and Article 22d of the Personal Income Tax Act) by 50%;
11. Strengthening the social security system, reducing the shadow economy and undeclared work through:
Increasing the maximum social security income to 2,600 euros. Currently, the net disposable income of persons who receive income from work in an amount higher than the maximum social security income is relatively higher compared to persons with lower incomes, which leads to a deepening of inequalities;
Removal of the so-called "ceiling" of pensions, as an incentive for workers to secure higher pensions in the future;
Review and update the level of the minimum social security income for individual economic activities and qualification groups of professions in relation to the achieved levels of the average salary for the respective economic activity according to NSI data.