I see reason for moderate optimism, but along with this, a few red flags. This was commented on in the “Interview in NOVA News“ by the senior economist of the Institute for Market Economics Lachezar Bogdanov regarding the new tax changes that the government is proposing.
According to him, there are many changes that improve the business environment and make the tax system work better, more efficient and fairer. “Raising the VAT threshold, the gradual updating of tax assessments to bring property assessments closer to reality, several measures to better enable enterprises to reduce their costs and taxable profit when investing“, said Bogdanov.
As a big red light, he pointed to the idea of taxing excess profits. “This is a very controversial idea and in my opinion will cause a very serious debate“, he said. “We are currently discussing a menu of proposals, and secondly, we have not seen the expenditure side of the budget“, added the economist. He noted that when we talk about stable public finances and fighting the large deficit, we must also see reforms on the expenditure side.
“Bulgaria says to all businesses: with us the tax is 10%, invest, do business openly and you will pay that much in the long term. This is the red light in the proposals. I assume that there will be a serious discussion on this topic. This is the concern - you say, on the one hand, this is a very important measure, it will raise money, but on the other hand, for one year - well, how can business believe that it will be for only one year? Suddenly the Ministry of Finance can say: “Well, very good, we raised a lot of money, why not continue, and why not extend the scope?“ And a vicious circle is created, in which suddenly the increase in taxes, and a significant increase in tax rates, will somehow begin to be accepted as something normal, and this will worsen the long-term prospects for economic growth and increasing the competitiveness of the Bulgarian economy“, said Bogdanov.
“If we exclude this rather dangerous idea of taxing excess profits in the way it is currently presented, the other proposals are rather reasonable and subject to a good economic or fiscal logic. In most cases, they correct defects in the existing tax legislation“, he also noted.