The success of the Bulgarian economy depends, as is often said about Germany, on its entrepreneurs. They work hard for a living and they should not be targets for raised taxes or social security levies at the present time of economic crisis.

A couple of weeks ago the new government announced 82 "short-term anti-crisis measures" (supposed to cover a nine-month period from July 27 2009 to April 27 2010) and very quickly a week later adopted them.

In the package of 82 measures are also integrated 32 measures, approved by the National Council for Trilateral Cooperation (which includes representatives from the government, trade unions and the biggest employers’ organisations). And buried among these 32 measures is one aimed at increasing the size of the minimum insurable income base or threshold for self-employed persons and freelancers from the present level of 260 leva to 420 leva!

This measure is envisaged to take effect from January 1 2010. The expected outcome (according to those who proposed it – the employers’ organisations) is to increase revenues from social security contributions in the social securities (pension) budget.

So what are the problems with this particular ‘anti-crisis’ measure?  First, it is definitely not a short-term measure. Secondly, it contradicts another measure in the package – decreasing the social security burden by five per cent over the next four years (that’s fine for employers, who clearly want the cost of the saving for them to be dumped on the self-employed and freelancers)!

Thirdly, this is in effect a 61.5 per cent increase in the minimum insurable income for self-insured people: that looks more like shock-therapy than an anti-crisis measure (the logic should be that when the economy is shrinking, this base, if not reduced, should at least remain at its present level)!

Fourthly, self-employed persons don’t have secure or regular income like state and private employees do, i.e. in time of crisis many of them may not earn as much as 560 leva (on average) per month, income which after the 25 per cent statutory deduction for incurred business expenses, leaves the proposed minimum insurable income of 420 leva!

And finally, this is a clear case of discrimination against the self–employed and  a stark example of social injustice – in a country where the average minimum insurable income (MII) is 379 leva and the average rate of growth of the MII for both state and private hired persons for 2009 compared to 2008 is 26.6 per cent, one group of persons will be forced to pay social securities on a minimum insurable base higher than the average MII for the country, and the rate at which this MII will increase is more than double the rate at which MII has increased (and will increase) for the other working groups. Where is social justice, what exactly is the state doing here?


The bottom line is that an ill-considered measure like this, delivered by stealth without consulting those concerned (260,000 people who regrettably are not represented by a professional body in the ‘mighty’ National Council for Trilateral Cooperation), will drive increasing numbers of self-employed persons into the "grey economy" or simply force them into the employment market – with consequential costs to the government in paying unemployment benefit at a later date to ‘ex free-lancers’!

This in effect will decrease (not increase as the government and employers predict) the revenues in the social securities budget!