Minor Budget Expenditure Reduction in 2009 despite the Crisis
The budget implementation data for 2009 published at the end of last week shows consolidated program annual deficit of 529.5 million leva or 0.8% of the GDP forecast. On the one hand the deficit coincides with the recent government budget statement of no more than 500 million leva deficit for the year. On the other hand, the forecast used for the 2010 budget adopted in December 2009 was for a balanced 2009 budget. This means that the government failed to meet its zero-deficit forecast which it made only two months ago. Not to mention that the final balance significantly differed from the official yearly budget forecasting 3% surplus based on unrealistic assumptions for the revenue during a crisis.
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Do Not Raise the Deficit*
This week the Bulgarian President became spokesman of the creeping rehabilitation of the “virtues” of budget deficits. It seems that the Prime Minister and his colleagues see political advantages in this idea and are keen on softening the fiscal policy too. These populist positions have always easily found support in our society and have always led to heavy economic consequences. In today’s circumstances they directly undermine the stability of the currency board, which is the single sensible consensual decision in Bulgarian economic policy in decades.
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Social security payments, rather than the VAT
During the week There was active discussion during the week whether and how to reduce the VAT in Bulgaria: a more drastic 2-percent reduction from the next year or 0.5 percent every 6 months? The news for lowering taxes should sound good, but in case there is an alternative that is far more attractive. If we tear down taxes, then let us focus on the most problematic ones, namely those on labor.
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IME's New Campaign: "State Expenditures in Bulgaria"
The Institute for Market economics started a new campaign at the beginning of 2010, attempting through observation and analysis to asses the transparency, soundness and efficiency of public expenditures. The long term objective is to reduce the cost of government and more freedom for citizens.
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We will be working for five months for the government even during the crisis
June 1 2010 is the day on which we will stop working for the state and start working for ourselves – more precisely at 16 hours and 23 minutes on Tuesday (1 June 2010). In 2010 Bulgarians will work for 5 months to pay various taxes and duties, i.e. to fill state treasury. The so-called “Tax freedom day” in recent years occurs at the end of May but in 2010 it will move to June.
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Expenditures of the Triple Coalition in Bulgaria
...Data give a good reason to look back in time and see what happened with public finance throughout the whole mandate of this government (starting from the elections in June 2005). For this purpose, we will use data on the fiscal reserve of Bulgaria at the end of each month during the mandate of the triple coalition. Simply said, when there is a rise in the fiscal reserve, then the government has collected more than it has spent, whereas when there is a decline in the fiscal reserve, then the government has spent more than it has collected.
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