site.btaTwo Government Coalition Parties Unveil Anti-inflationary Packages

Two parties of the government coalition announced measures on Thursday for which they will seek support from the other two partners.

The Democratic Bulgaria coalition proposed anti-inflationary policies, while the Bulgarian Socialist Party (BSP) put forward a new social package, including social benefits and recalculation of pensions. Deputy Prime Minister Assen Vassilev also said recently that he was mulling measures against the price surge without giving details.

Democratic Bulgaria suggests economic measures intended to fight high inflation and the appreciation of energy sources. As a result, budget revenues will decrease, but businesses and consumption will be supported.

The economic experts of Democratic Bulgaria unveiled three steps to support business.

First, the VAT registration threshold should double to 100,000 leva from January 2023, and increase to 166,000 leva from January 2024. "At least 90,000 companies will be affected by the first step and 110,000 companies by the second one," said Martin Dimitrov MP of Democratic Bulgaria, who chairs the Parliamentary Economic Policy and Innovation Committee. This will benefit small businesses by reducing their administrative burden. Dimitrov added that this is the only measure that could affect the budget, which may lose 250 million leva. He argued however, that those businesses would expand their activity and profits and the resulting increase in taxes would offset the loss.

The other two measures proposed by Democratic Bulgaria are lowering the interest on late payment and lifting the barriers on third-country imports into the EU for six months.

"As imports increase, supply will rise and prices will fall, which will curtail inflation in Bulgaria," said Dimitrov.

The three measures will be put forward for discussion to the coalition partners on Friday. Democratic Bulgaria has already drafted legislation addressing the first two measures.

Inflation is a key concern for the Bulgarian Socialist Party as well, but the Left's proposal is more taxing on the budget than that of Democratic Bulgaria.

Interviewed on bTV, BSP leader Kornelia Ninova again stressed the urgent need of energy poverty criteria and a water allowance, adding that the new social package should target vulnerable groups.

She initiated a meeting of the coalition's councils on economy, finance and social policy, which will discuss the surge in prices, rising inflation, impoverishment, the hurdles to business and the risks facing the Bulgarian economy.

Ninova suggested a three-pronged approach based on EU practices. "The first set of actions concern tax matters. Is it possible to reduce VAT on regulated services because this will ensure lower prices for end customers?" she asked. She spoke in favour of lower VAT on electricity, heating, water and medicines, whose prices are regulated. This is seen as an evolution of the Left's position, which was pressing for lower VAT on food until recently.

Lower fuel excise duties could also help, although Bulgaria's are the lowest in the EU, said Ninova.

Second, several scenarios for pension recalculation are in the works, although Ninova did not say how much a new pension rise would cost.

Third, certain price caps could be considered, said Ninova, citing Greece's markup cap, Romania's cap on electricity and gas prices, and Poland's 5 per cent VAT rate on electricity and 0 per cent VAT on natural gas.