Krasen Stanchev on Flat Tax Forum 2012

Dr. Krassen Stanchev, Sofia University and the Institute for Market Economics (www.ime.bg )

11st globar flat tax conference, Bratislava, 4-5 OCT 2012

The idea and its exploration and implementation in contemporary Bulgaria

1990-1991 – Constitutional Assembly

1994-1997 CrisisPost 1997 – 10 years of campaign

2007 – to present day


Indicators (average)1990-

1997

1998-200

4

2002-2004

Inflation (%) 210.1 7.5 4.8

Inflationary tax rate (%) 57.7 6.9 4.5

GDP growth (%) -4.7 4.4 5.0

GVA growth (%) n.a. 4.0 4.9

Investment growth (%) -8.8 18.2 11.4

Budget deficit/surplus (% of GDP) -6.3

0.2 0.4

Government debt (% of GDP) 168

65.9 48.3

FDI (USD million)168

1,253.4

1,867.7

FDI (% of GDP) 3 7.4 9.1

Subsidies (% of GDP) n.a. 2.1 2.5

SOURCE : National Statistics, IME.


Inflation /GDP Dynamics: February 1991 - February 1997

-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

1991 1992 1993 1994 1995 1996 1997

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

GDP

Inflation

4


Current situationFiscal deficit – 0.7%Inflation – 2%Government debt – 16.7%, CDS – goes downGrowth – 2%Banks: 17% CAR, deposits cover the credits,

non-performing loans – 12%Longest period of economic growth since

1878Accumulated FDI since 1997 – 49 times

higher that FDIs for 1992-19975


Flat tax campaign 1997-2007Bratislava – 1997-1998Sofia – 1997-2001 – unified corporate tax rates,

from 40 to 28%Gradualism, justification of 10% rateFlat tax bulletin and alternative state budget –

2003 and after; focus on social taxes, especially after 2007

Since 2004 – annual determination of contributions to pay-as-you-go

2005 elections2005-2009 tri-party coalition


Year/rates

2001 2002 2003 2004 2005 2006 2007

Corporate tax

28% 23.5% 19.5% 19.5% 15% 10% 10%

Income tax

20-38%

18-29% 15-29% 12-29% 10-24%

10-24% 10%

Social 42.7% 42.7% 42.7% 42.7% 42.7% 36.6 16.9%

VAT 20% 20% 20% 20% 20% 20% 20%


SOURCE : Yavor Alexiev, IME.


Help from abroad and domestic challenges?Knowledge of other countriesParsson, Schreuder, UnkerEU dimension:a)Taxes and EU subsidiesb)Rhetoric against tax competition Domestic issues:a.Unfinished reformsb.Expenditures and competition for privileges


ProspectsSocialist already campaign for progressive

taxationIncumbent government is rather populist and

faces electoral challenge next yearPresident Plevneliev at CNBC:http://video.cnbc.com/gallery/?video=3000117945 Among authoritative economist-commentators

there is one person who campaigns against the flat tax

Overall left-populist mood in the mediaWelfare system malfunctions


Krasen Stanchev on Flat Tax Forum 2012

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