Sofia Echo


Macro: Desperate times

Author: Alex Bivol Date: Fri, Mar 19 2010 8287 Views
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The Cabinet is yet to officially unveil its latest anti-crisis measures, but an alleged leaked Finance Ministry draft proposal has already stirred the public ire.

It has been described as "imbecilic" and "monstrous" by some parts of the media, based on the fact that in its desperation to shore up Budget revenues, the plan envisions the increase of the tax burden by making all tax payable on gross income, rather than the net amount, after the deduction of the mandatory social and health care security contributions.

They say desperate times call for desperate measures, but the idea of taxing what one already pays as tax (and such contributions are a very direct form of taxation, make no mistake about it), is beyond desperate.

The Finance Ministry quickly hit back, saying on March 17 that the alleged 28-point plan never existed and that more than 100 measures were being analysed before a plan could be presented to Prime Minister Boiko Borissov and the tripartite council that brings together Government, labour unions and employer associations.

Inevitably, the ministry’s statement made inroads best left to conspiracy theorists, saying that the ministry "was aware" that media publications were purposefully trying to incite public opposition to the Cabinet’s economic policies. It is true that just a decade ago certain parts of the media did a very good job blackening the name of Bulgaria’s last right-wing government.

While few would say that Ivan Kostov’s was a perfect government, the treatment media gave him was much worse than succeeding ones, which made no fewer questionable decisions, but did have a booming economy on their side and Budget surpluses to spend.

Back to the situation at hand, however, it is safe to say that people would reject any plan that would increase their taxes no matter what the newspapers say. Borissov does not have that luxury and finds himself having to make unpopular decisions to make ends meet. Unlike Sergei Stanishev, Borissov does not have overflowing coffers to hand out pension and salary increases, while covering the shrinking social contributions with rich pickings from value-added tax generated from the consumption boom.

But Borissov does crave the public’s affection so. An unfortunate side-effect of that yearning is that anytime there has been any sort of public opposition to measures proposed by his Cabinet, the Prime  Minister swiftly backtracked (witness the state of the health care reform, for instance). The result is the appearance of indecisiveness, which when coupled with other grand announcements that have failed to materialise yet (cutting down the size of public administration and tangible results in fighting organised crime), it does not bode well for Borissov’s ambition to retain the public’s affection.

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