Dr. Krassen Stanchev presented on Bulgaria's flat tax reforms from 1990 to present day. After an economic crisis in the 1990s, Bulgaria implemented tax reforms starting in the 2000s, gradually lowering corporate and income tax rates to a flat 10%. This led to indicators like inflation, GDP growth, investment, and FDI increasing substantially from the 1990s to 2000s. However, there are still domestic challenges like unfinished reforms and expenditure pressures. There is also some populist opposition emerging to Bulgaria's flat tax system.

1. Dr. Krassen Stanchev, Sofia University and the
Institute for Market Economics (www.ime.bg )
1st globar flat tax conference, Bratislava, 4-5 OCT
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2. The idea and its exploration and
implementation in contemporary Bulgaria
1990-1991 – Constitutional
Assembly
1994-1997 Crisis
Post 1997 – 10 years of campaign
2007 – to present day
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3. SOURCE : National Statistics, IME.
Indicators (average) 1998- 2002-2004
1990-1997 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 0.2 0.4
GDP) -6.3
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.
1st globar flat tax conference, Bratislava, 4-5 OCT
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4. Inflation /GDP Dynamics: February 1991 - February 1997
4.00% 500%
450%
2.00%
400%
0.00% 350%
1991 1992 1993 1994 1995 1996 1997 300%
-2.00%
GD P
250%
-4.00%
Inflatio
200% n
-6.00% 150%
100%
-8.00%
50%
-10.00% 0%
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5. Current situation
Fiscal deficit – 0.7%
Inflation – 2%
Government debt – 16.7%, CDS – goes down
Growth – 2%
Banks: 17% CAR, deposits cover the credits, non-
performing loans – 12%
Longest period of economic growth since 1878
Accumulated FDI since 1997 – 49 times higher that
FDIs for 1992-1997
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6. Flat tax campaign 1997-2007
Bratislava – 1997-1998
Sofia – 1997-2001 – unified corporate tax rates, from
40 to 28%
Gradualism, justification of 10% rate
Flat 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 elections
2005-2009 tri-party coalition
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7. Year/rate 2001 2002 2003 2004 2005 2006 2007
s
Corporate 28% 23.5% 19.5% 19.5% 15% 10% 10%
tax
Income 20- 18-29% 15-29% 12-29% 10- 10-24% 10%
tax 38% 24%
Social 42.7% 42.7% 42.7% 42.7% 42.7% 36.6 16.9%
VAT 20% 20% 20% 20% 20% 20% 20%
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8. SOURCE : Yavor Alexiev, IME.
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9. SOURCE : Yavor Alexiev, IME.
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10. SOURCE : Yavor Alexiev, IME.
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11. SOURCE : Yavor Alexiev, IME.
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12. Help from abroad and domestic challenges ?
Knowledge of other countries
Parsson, Schreuder, Unker
EU dimension:
a)Taxes and EU subsidies
b)Rhetoric against tax competition
Domestic issues:
a. Unfinished reforms
b. Expenditures and competition for privileges
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13. Prospects
Socialist already campaign for progressive taxation
Incumbent government is rather populist and faces
electoral challenge next year
President 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 media
Welfare system malfunctions
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