Parking in Sofia is once again proving to be a drama, but will there be a turnaround after people protest? The budget procedure is underway, but are there threats when adopting the euro… Dimitar Margaritov, former Deputy Minister of Economy and former Chairman of the Consumer Protection Commission, spoke to FACTI.
- Mr. Margaritov, how did it come about that the Sofia Municipality practically equalized 1 lev with 1 euro, increasing the fees for „blue“ and „green“ zone?
- Unfortunately, we, the consumers, never understood what path was taken to arrive at this proposal, and accordingly to the decision of the Municipal Council to approve it almost without changes. From what we see as a reaction, both public and institutional, it is clear that this time there will be inspections. And it is important to understand what arguments this sharp increase in prices is based on.
The strange thing is another: when the state adopts laws and introduces restrictions on price increases – and this happened very recently, precisely because of fears of unjustified price increases in connection with the adoption of the euro – it set very strict requirements for business.
And I do not want to oppose the state and the municipality politically, but it is a fact that when the public authority decides to increase its services, consumers must be fully aware of the arguments and the expected effects.
Just to clarify – let's not look at the “blue“ and “green“ zones as an isolated case. This week, the topic of price increases began to be exposed again and it is important to see the economic justification against this background. The law clearly states that prices for services can only be increased for economically justified factors. It must be proven that there is a real need.
- Do you expect the CPC and the CPC to do their job?
- We see that the Consumer Protection Commission has already initiated its own investigation into the issue of the zones. It will be very interesting to see the position of the other regulators. I personally expect there to be inspections and I expect the results to be clear and public. We have been saying for months that a sharp increase in the price of consumer services should be avoided, especially in the context of entering the eurozone. Many people blame the eurozone for the pro-inflationary pressure that is emerging. That is why special laws were adopted, traders were – not to use strong words – “strictly warned“ by the institutions not to raise prices unreasonably.
- And what does it turn out to be? The first structure that allows itself a sharp increase is the state itself in the person of the municipality?
- This is truly paradoxical. It is good that an inspection has begun. The municipality will have to present its arguments and prove economic grounds. There should be no difference between a private business entity and a state or municipal one. Here we are talking about a legal entity – Urban Mobility Center – which raises the price of a service. And unlike the private sector, there is no competition here. This in itself increases the tension.
- Why?
- I will give an example: there are private companies that will be forced to keep their prices for years to come because they operate in a competitive market and must comply with the law. But others who have a monopoly can change them without competition and without real control. This does not sound market- or economically justified. But let's see the results of the inspections and the public position of the operator.
- And why is all this happening right now? Do you link it to the adoption of the euro or is it a coincidence?
- The problem with parking in Sofia is not from yesterday, but let's see the inspections. And, frankly, I do not see any connection with the euro. The introduction of the euro is a technological process that in itself has no relation to the prices of services, which should be formed according to economic logic. If it is claimed that funds are needed for investments - this argument could have been used a year ago, or six months ago. Nothing new has happened.
And another thing: if the revenues from the zone are to go to certain investment funds, the logical thing is to first make this reform towards transparency of spending.
Only after that, if the funds are not enough, to discuss raising prices. Now the opposite is done.
- And we see protests. People are dissatisfied…
- The public reaction shows that the method is wrong. If institutions are also taking action themselves, then there is something suspicious. It is good that the state is functioning – we just have to see the results.
- The budget is being adopted. Some like it, others criticize it. How do you view the state's budget?
- The budget will probably not change dramatically before it is adopted. From a consumer perspective, if there is anything good about these parameters, which are so widely discussed, it is that they do not have the potential to cause an inflationary spiral. They do not foresee much of an increase in income, on the contrary - rather a burden on certain systems with a higher social security burden, with these new taxes. And against the background of the many factors that are now being highlighted in the adoption of the euro as pro-inflationary, this budget, thank God, will not be one of them. Unlike in past years, when budgets from the very beginning contained such potential and then this potential was realized to some extent. Let's see what will be adopted in the end. But let's be relatively calm from the point of view of that important thing that awaits us from January 1st - namely the adoption of the euro. If we keep a consumer's composure, I think things will go completely smoothly.
- The topic of increasing some taxes appeared precisely with this budget. Which of the governing parties has included a tax increase in its program?
- From public information, we know that the BSP – United Left – want to renegotiate, rethink the entire taxation system in Bulgaria, and return to the proportional system. So this topic remains open if the configuration of the government continues to be the same.
- Is dividend tax being discussed a lot now?
- Regarding dividend tax – I have not heard anyone commenting on it specifically in the past months, anyone promoting its increase before this was proposed in the draft budget. Now the comments are more of a storm in a teacup, because it generally does not make a big difference in the revenue side and is a slightly more exotic tax.
It will most likely cause some disruption, but in a limited number of users and systems.
Rather, just keeping the basic tax framework as it is means what I said at the beginning - that no severe fluctuations are expected that would trigger processes along the lines of an inflationary spiral.