Bulgaria think-tank presents leaner Budget alternative

Written by on October 18, 2012 in Bulgaria, Business, News - No comments
copper and silver coins in a pile

A week after the Cabinet approved the 2013 Budget bill, Sofia-based think-tank Institute for Market Economics (IME) presented on October 18 its annual “alternative Budget” – a leaner bill with lower Government spending and a slew of familiar proposals.

IME has been presenting its “alternative Budget” for 10 years now and some of its proposals remain invariably the same: a 10 per cent cut in the payroll and current spending of the public administration, 25 per cent less funding for all types of subsidies, as well as the abolishing of several taxes that the think-tank sees as inefficient and further compounding the burden on taxpayers – taxes on dividend (now at five per cent) and inheritance among them.

Other proposals include removing tax breaks in certain areas, like the lower value-added tax on tourist services, which the think-tank says cost the 2011 Budget 100 million leva in lost revenue, and asking certain institutions to raise their own revenues rather than counting on state subsidies (universities being one example of such institutions).

Equally familiar are IME’s proposals for pension reform – allowing people to choose whether to pay their mandatory monthly contributions to the National Social Security Institute or place them in individual pension savings accounts – and health care reform – revoking the monopoly of the National Health Insurance Fund and allowing people to pay up to two per cent of their salary (a quarter of the monthly mandatory health care contribution) to private health care insurers.

“These changes offer a real stimulus to pay the mandatory contributions – instead of empty promises [of a state pension], a personal savings account; instead of paying into the common health care pile, exercising your own preferences. That is real stimulus policy that offers a choice, instead of one that brands people dodging payments as criminals,” IME said.

IME’s draft envisions lower Budget revenues at 29.1 billion leva, rather than the Finance Ministry’s 30.5 billion leva, mainly from the reduced pension and health care payments. On the spending side, the think-tank’s proposal is to cut government expenditures by nearly 2.6 billion leva (a full three per cent of gross domestic product), resulting in zero deficit. The 2013 Budget bill targets 1.3 per cent deficit.

(Photo: Alessandro Paiva/sxc.hu)

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