The proposed tax on excess profits and ways to control the budget deficit caused a sharp dispute between economists Lachezar Bogdanov, Lyubomir Datsov and Vanya Grigorova on the air of “Hello, Bulgaria“ on Nova TV. While Grigorova defended the idea that the state should seek more revenue from sectors with high profits, Bogdanov and Datsov warned about unpredictability for business and a lack of sufficient reforms in the expenditure side of the budget.
Member of the Fiscal Council and former Deputy Minister of Finance Lyubomir Datsov questioned the expected revenues from the planned measures. “I can bet that the revenues they will collect from what they announced will be half as low,“ he said. According to him, the main problem is that the Ministry of Finance does not propose sufficient measures to limit spending. Datsov believes that if higher taxes are needed, they should be introduced in a general manner, and not by taxing only selected sectors.
Vanya Grigorova defended the opposite thesis. According to her, with a growth in bank profits of 588%, it is justified to direct part of the funds to the budget. “The Bulgarian budget needs funds to pay pensions, maternity, unemployment benefits“, she pointed out. Grigorova also insisted on regulating bank fees, which according to her are among the factors for the high profits of the sector. “Fees must be regulated categorically“, the economist said.
The chief economist of the Institute for Market Economics Lachezar Bogdanov defined the tax on excess profits as an extraordinary measure that should be resorted to only in extreme situations. "The risk is rather in the long-term introduction of a huge unpredictability in the tax environment," he warned. According to Bogdanov, it is not clear enough why the rate was set at 33%, which sectors should fall within the scope and by what criterion a profit is defined as "excess profit".
The three economists also disagreed on the question of whether the state should first reduce expenses or increase revenues. Grigorova used an analogy with the household budget: "When you have a hard time paying for your electricity and having a hard time providing for the necessary things for your child, what do you do - do you cut his breakfast or look for ways to increase your income?" Bogdanov responded with his own analogy: "If you can't afford a diaper for your child, you don't drink a €6 cappuccino every day."
According to Bogdanov, the leading question facing fiscal policy should be how Bulgaria can maintain economic growth, investment, low unemployment and income growth. He also drew attention to the rising cost of government debt, pointing out that interest costs, which were below €350 million a few years ago, could reach around €1.7 billion.
Datsov predicted that the budget deficit could remain around 3.8%, but stressed that one-off revenue solutions cannot replace structural changes. "Patching up with one-off measures simply won't help the situation, because this is a long-distance race. This is not a sprint," he concluded.