29th of May – The Tax Freedom Day

According to calculations made by the Institute for Market Economics, 29th of May is the day of freedom from government involvement for 2007. On this date the citizens stop working for the government and start working for themselves.

We come up with this figure as explained below. If the government takes the total average income of citizens until fulfilling the budget revenue for 2007, then exactly 149 days or exactly till 29th of May Bulgarian citizens are working for the state that spends and allocates funds. After this date, each citizen is free to earn and spend for himself.

The idea to calculate Bulgaria’s tax freedom day has been adopted by the initiatives undertaken by the “Fraser Institute”, Canada and the Cato Institute, Washington, which are estimating the Tax Freedom Day each year.

The data for 2005, 2006, and 2007 can be found in Table 1. Under “Budget revenue” we included the revenue government is collecting both from taxable and tax-exempt income of the citizens, but the subsidies received from third sources (i.e. revenue from EU pre-accession and structural funds) has not been incorporated in the “Budget revenue”. In the data used, the estimated and predicted budget surplus has been included. In 2005, the budget surplus is 4.6% of the GDP. In 2006, based on careful analyses of the budget expenditure until September of the current year, we expect a surplus of 3.1% of the GDP. In 2007, our conservative forecast estimates are for budget surplus of 1.3% of the GDP. It is realistic to assume higher surplus in 2007, but based on the uncertainties of the EU membership we are careful in making brave scenarios.

As it is obvious from the data in Table 1, even though the corporate tax has been reduced to 10%, the tax freedom day will not come earlier in 2007 than in 2006. What is even more striking is the fact that the re-allocation of resources has an upward shift, respectively the role of the government in the everyday life is not decreasing but just transforming.