There are two preconditions to make a businessperson happy - not paying taxes and working in a place without bureaucracy.

An absence of taxes is almost impossible, but they can be lowered so that the overall tax burden stimulates entrepreneurship and makes cheating pointless. In the past six years, some taxes in Bulgaria have been lowered. Corporate tax now is 10 per cent (with Cyprus, the lowest in the EU) and the top income rate is 24 per cent, also one of the lowest in Europe.

The other precondition, however, appears to be more difficult to achieve in Bulgaria.

What is the case in Bulgaria?
Since the beginning of the reforms in Bulgaria 17 years ago, registering a company was done in court. The procedure is long, a lot of documents are required, some requirements are useless, people depend on working hours and are faced with clerks discouraged by low pay and therefore unwilling to be helpful. All these hinder setting up a business, impose costs and, overall, are an impediment for both local and foreign investors.

According to the World Bank, Bulgaria is at 85th place out of 175 countries according to the “starting a business” indicator. In 2006, it took about 32 days, nine procedures and a cost of 7.9 per cent of gross national income per person to register a company. Additionally, the existing requirement for minimum capital can be a significant obstacle for new starters, and is a form of tax by which the state “guarantees that no unreliable people” would consider starting a business.

Business freedom is the ability to start, operate, and close a business. Often regulations that make it difficult and expensive to close businesses are disincentives for entrepreneurs to start them in the first place. Although many regulations hinder businesses, the most important are associated with licensing new companies and businesses. In some countries, as well as many states in the United States, the procedure for starting a business can be as simple as mailing in a registration form with a minimal fee. In Australia, for example, obtaining a business licence requires filling out a single form that can be filed electronically, and the process can be completed in a few hours. In other countries, such as Brazil, the process involved in registering a company requires endless trips to government offices and can take more than 152 days.
Once a business is open, government regulation does not always subside; in some cases, it increases but this is not the subject of this article.

The long process
The idea to take company registration away from the courts has been around for many years. Several European Commission monitoring reports said that this would happen as soon as possible. The initial deadline was October 2006. Then it appeared that the system was not ready and would not, at the time, be capable of operating properly. The second delay was in January 2007 - the excuse was lack of buildings to accommodate the new registry offices even though the law stipulated how offices should be established and who would be responsible. The third and most recent postponement was in July 2007 when Prime Minister Sergei Stanishev said that there were not enough people interested in working for the register because of the low salaries and high qualification requirements.

The truth is that if we wait for everything to be ready, it will take an increasing amount of time. Simply said, one big system could never be fully ready at one time. The other truth is that if no one is held responsible for the delay, this saga could go on forever. Lack of trust is a big problem when it comes to administrative and structural reforms in Bulgaria.

What is wrong with the idea?
First, the law on the commercial register envisages that new registration should be done by all companies in a period of three years after the start of the operation of the registry. This way, inactive and phantom companies would be left without registration and various problems would be solved.

Second, the fees that everyone should pay for access of information from the registry have been reduced but still are relatively high compared to the best international examples.

Third, the staff requirements for more than three years of judicial experience. Passing this test appeared to be a problem given that salaries are low. An open question is why such requirements are in place since the very idea of the reform is that registration be done by the administration and not by the court staff.

Effects of delay
Delaying a major reform is not a good sign for government administration and its capacity to promote economy growth. The effects can be summarised as:

1) Bulgaria’s competitiveness is lower than the neighbours’ - if you are an investor and have to choose where on the Balkans to start a business, you will find out that it is easier and cheaper to run your business in Romania and Serbia. Of course, these are not the only factors when taking a decision, but the comparison shows that quick change is possible and should be implemented in Bulgaria.

2) Crisis in reliability of government capacity to conduct reforms - this is important especially for foreign investors and international institutions.

3) Smaller new business formation - this is very important for every economy that wants to prosper and be dynamic enough so to respond to a changing environment.

4) A reasonable question is what has become of all the money spent so far on the reform. This was one of the justifications for the delay, but no single report is available to judge the effectiveness of the decisions taken by the administration responsible. This in turn leads to uncertainty whether even greater reforms can be achieved without an external review and control. And we all know that such reforms have been pending for years.