site.btaCrises Have Pushed Tax Freedom Day to Late May

This year, Tax Freedom Day in Bulgaria is on May 26, the Institute for Market Economics (IME) said. Tax Freedom Day is the day when the people of a given country have earned enough money to pay their total tax bill for the year and, figuratively speaking, begin working for themselves.

In 2022, Bulgarians have been working 146 days for the government. The state budget, which was not adopted until late February 2022, stipulates over 57 billion leva in public revenues. Assuming that the daily output of the national economy is 392 million leva (based on a GDP of 143 billion leva, as was forecast at the time of the budget adoption), Bulgarians needed at least 146 days to fill up the national coffers.

Over the last two years, Tax Freedom Day in Bulgaria has moved from the middle of May to the end of the month due to higher levels of redistribution through the state budget. Up until the COVID-19 pandemic broke out, the redistribution rate was 36-37% of GDP and the state budget balance was around zero. After the pandemic struck in 2020, the government began to play an ever more important role and the state budget deficit grew relatively high, the IME said. Bulgaria's medium-term budget forecast envisages that consolidated revenues will be maintained at close to 40% while the state budget deficit will remain around or even above 3% of GDP at least until 2024. This means that Tax Freedom Day will still fall on late May in the coming years.

As usual, Bulgarians had to work for three main groups of taxes in 2022. A total of 58 days of work were necessary to pay direct taxes and social and health insurance contributions (including 24 days for direct taxes and 34 days for social and health insurance). Indirect taxes required 54 days. Property taxes, which are a key source of municipal income, took a little over 3 days of work. Non-tax revenues required 18 days (proceeds from charges for individuals and businesses make up the largest portion of these).

An expected revision of the 2022 state budget, including the adoption of anti-inflation measures, will probably change the main budgetary indices and may push Tax Freedom Day to an even later date, the IME said. High inflation, which impacts both state budget revenues and nominal GDP, will also influence the state budget. However, the growing redistribution levels remain the most important news related to tax freedom. The greatest burden is customarily borne by the working people, for whom Tax Freedom Day this year is at the beginning of the summer.