15.05.2014

"We have changed the philosophy of the Government's fiscal policy in order to create prospects for a restart of the economy, gradual acceleration and a more sustainable growth model". This is what Minister of Finance Petar Chobanov said when delivering his lecture before the students of the Episkop Konstantin Preslavski University of Shoumen on Philosophy of the Government's Fiscal Policy: Growth Perspectives and Measures. In his presentation the Minister outlined the new things in public finance management that support the economy and inject fresh liquid business resources. There has been a change in the recently imposed macroeconomic model of containing growth through fiscal policies. The measures taken include making arrangements within the revenue administration in view of the timely and consecutive reimbursement of VAT. "The model of reallocation of public finance has been changed towards using the budget as an effective instrument for supporting growth, promoting of investment and employment and ensuring the necessary social protection for the vulnerable groups of the population", the Finance Minister underlined. "Targeted measures and mechanisms are envisaged concerning several key policies in accordance with the Government's national priorities, among which education, healthcare and social care", said Minister Chobanov.

The minister also presented the priority directions in tax legislation aimed at reduction in the administrative burden, better revenue collection, fight against smuggling, promotion of investment and employment, greater energy efficiency and better environmental protection. "Tax and social security policy in the medium term will continue being oriented towards supporting economic growth and enhancing fiscal sustainability in the long run", he said firmly. The Government's measures and policies aimed at reducing the administrative burden for citizens and companies, improving the business climate and enhancing the competitiveness of the economy were also touched upon in the lecture of the Finance Minister. "The settlement of the state's liabilities to the business has resulted in the timely payment of taxes and social security contributions by the businesses themselves and in a better revenue collection, respectively", said Minister Chobanov. According to him, the process of VAT reimbursement is much better, the rules are respected and the result is BGN 150 million more of indirect taxes reimbursed in the first four months of the year compared to the same period of last year based, judging from the preliminary data.

The purpose of the Growth and Sustainable Development of the Regions Public Investment Programme is to achieve economic growth, sustainable development of the regions, greater competitiveness of the economy and possibilities for generation of jobs and income. The Minister also said that the whole country had been covered, with both cities and towns and villages receiving financing. He assured that next month there would be a review of the public procurement procedures held and finalized and of the contracts signed with project contractors and the released financial resources would be transferred to other projects.

"Bulgarian Development Bank is a bridge between the state and the businesses and a lever for accelerating growth. Its objective is to create favourable financial environment, to foster innovation, exports and production, as well as Bulgarian companies' competitiveness", Minister Chobanov said. It is the only a 100% state owned bank on the domestic market ensuring easier access to financial resources with a clear focus on small and medium-sized enterprises at an interest rate of around 6%, which is fixed for the whole period of the loan.

In the discussion session Minister Chobanov answered questions of students and professors. To a question about incriminating VAT evasion he answered that actions had been taken addressing tax fraud. Such mechanisms are the fiscal control over risk goods and reverse charging of VAT for cereal and industrial crops and their effect in the current year is expected to be around BGN 400-500 million. On the topic of the flat rate tax revocation Petar Chobanov said: "The inequality in income and social status hinders economic development and growth that is why the Government has created possibilities for gradual increase of income and support to vulnerable social groups. However, the tax structure will be preserved for the time being. The potential and advantages of this tax system have not been used optimally as yet".

Later, before journalists, Minister Chobanov commented that the Minister of Health and the National Health Insurance Fund Supervisory Board were working together on measures to discipline the system and to more effectively use the funds. According to him it was too early to determine what the deficit of NHIF would be as the measures should reduce it. "When such measures are required, we have done it, as in past years, when we did not leave the hospitals without money. This year revenues from health insurance contributions are on track, the plan will be fulfilled. We will see what the results of this optimization would be and will continue the discussion along the relevant lines so that the system can function normally", he added.

The growth composition gives grounds to expect that it will be higher in 2014. An additional factor for these expectations is also the forecast that the social measures taken last year and the provision of more funds to the businesses will show their effect. "All indicators relevant to consumer and business confidence are rising. There is better expectation that the economy will develop and this gives grounds on the one hand to the businesses to develop and invest, and on the other - consumption to increase", he further said and added that in April we began to overcome deflation which was a positive economic signal. To a question where we stand on the financial map of Europe Minister Chobanov replied that we have the second lowest debt in the EU and also a potential for development.