111 ECONOMY-TRADE UNION-TAXES-PROPOSALS
Minimum Non-taxable Income
Sofia, September 14 (BTA) – The Confederation of Trade Unions in Bulgaria (CITUB) urges changes to the current taxation and the introduction of a minimum non-taxable income equal to the minimum wage in the country, said CITUB leader Plamen Dimitrov. He was speaking Friday at a conference organized by the Friedrich Ebert Foundation and CITUB dedicated to the tenth anniversary of the introduction of the flat tax in Bulgaria.
The introduction of a minimum non-taxable income will exempt from tax low income groups and their disposable monthly income will increase. According to the trade union, the extra disposable income will be spent on consumption which will boost economic growth and VAT revenues.
The trade union believes that this step is in line with concrete proposals by the European Commission to Bulgaria to erase inequalities and curb the informal economy. Plamen Dimitrov said that the flat tax rate has increased inequality and that Bulgaria is the only country in the world with a Gini coefficient higher than 40 per cent.
The structure of bank deposits also reflects that. In June 2018 of a total of 9.7 million deposits, 6.1 million deposits held less than 1,000 leva.
Out of a total of 143 countries about which there is available information, 66 have minimum non-taxable income. Eleven EU economies have non-taxable income but at the same time another 14 use some kind of non-taxable base. The only EU countries without non-taxable base income are Bulgaria, Hungary and Croatia.
CITUB also suggests that the taxable base for incomes higher than the minimum wage is set after the minimum wage is deducted and a 10 per cent tax is levied on the remaining amount. This model doesn’t scrap the flat rate altogether but lowers its burden on low-income groups.
The trade union also calls for increasing the maximum contributory income from 2,600 to 3,000 leva as it has been frozen for many years but wages and the economy keep growing. CITUB suggests that it is gradually increased to reach 10 times the minimum wage.
These changes will result in an extra annual disposable income of 672 leva on average.
According to a survey of the Friedrich Ebert Foundation during these ten years the average increase of income tax revenues was 7.97 per cent. Pre-crisis it grew around 15 per cent, while post crisis it plummeted to a mere 0.9 per cent.
The situation is similar with other tax revenues. The pre-crisis growth was 15.3 per cent and post-crisis, 3.33 per cent. Throughout the period the average increase was 8.57 per cent.
Pre-crisis, the average share of tax revenues was 21.37 per cent of GDP, while after 2008 it was 20.4 per cent.
VAT revenues have been outgrowing GDP. CITUB says that indirect taxation is increasing and revenues are redistributed through public policies,
The social insurance burden is transferred on households to relieve businesses. The share of insurance contributions at the expense of households in the total share of net insurance contributions increased from 20.4 per cent in 2000 to 39.80 per cent in 2016. At the same time the share of insurance contributions paid by employers decreased from 79.6 per cent in 2000 to 60.2 per cent. LI/PP