Labour and Social Policy Minister Emilia Maslarova has rejected calls from the private sector, NGOs and her Cabinet and Bulgarian Socialist Party colleague Petar Dimitrov for a reduction in social security contributions payable by employers.

Dimitrov has indicated on a number of occasions that the BSP is considering a reduction in social security contributions. This would be done after the mid-2009 elections, he said. The BSP has said that the move could not happen before the elections.

Mandatory social contributions, which require employers to withhold part of employees’ wages, are currently pegged at 22 per cent, one of the highest rates in the European Union. Businesses, the opposition, NGOs and macroeconomists have long been calling for a cut to save firms hundreds of millions of leva at a time of crisis and help preserve jobs.

Dimitrov has been reported as saying that the contribution could be cut by the BSP to 14 per cent.

A survey of 160 executives, conducted by Bulgarian think-tank the Institute for Market Economics, showed that companies would lose 545 million leva, or 0.8 per cent of the target gross domestic product for 2009, from the increase in social security contributions implemented at the start of the year.

Simeon Dyankov, chief economist with the World Bank’s finance and private sector vice-presidency, also called on the Government to cut payroll taxes. A recent World Bank study said that reducing social security contributions by five percentage points would help businesses to keep 130 000 people employed. The Cabinet’s entire stimulus plan, with its heavy emphasis on Government spending, targets creating 80 000 jobs.

Dnevnik reported that the European Commission (EC) recently said that a cut of the rate should be used as a weapon against job losses amid the financial and economic crisis.
On May 12, Maslarova said that there should be no "experiments" attempting to use social payments as leverage to solve economic problems.

She said that a reduction in social security contributions would have to be compensated for by increasing other taxes. Reducing social security contributions without compensating by raising revenue from elsewhere would put Bulgaria’s pension system at risk, Maslarova said.

Dimitrov’s statements also got some skeptical coverage. Daily newspaper Sega describes his stance on social security payments as an election promise while mass-circulation daily Trud said that Bulgaria already had achieved one of the lowest levels of social security burden and countries that could afford low social security rates did not have the flat tax rate of 10 per cent, as is the case in Bulgaria.

Dnevnik reported Maslarova as emphasising the Government’s commitment to save 200 000 jobs through special schemes by her ministry, along with funds from the Human Resources Development operational programme of the EU.

"The rate of unemployment will be about seven per cent in the coming months, which is one of the lowest levels across the EU. According to Eurostat statistics, our unemployment looks even better," Maslarova said.

Eurostat, the statistical office of the European Union draws on data by Bulgaria’s National Statistical Institute.

Dnevnik said that Plamen Dimitrov, deputy chairman of trade union federation CITUB, did not buy Maslarova’s optimistic forecast, warning that the jobless rate will spiral to a double-digit figure in the autumn.