Finance Minister to Ride Bike to Save Bulgaria from VAT Hike

Finance | May 6, 2010, Thursday // 11:23|  views

Bulgaria's Finance Minister Djankov (left) might have to ride a bike to work as PM Borisov (right) is pushing for drastic austerity measures. Photo by BGNES

Bulgaria’s Finance Minister Simeon Djankov declared his readiness to ride a bicycle to work as part of the government’s newly adopted austerity measures.

Djankov confirmed his promise that the value-added tax in Bulgaria will not be increased at least by the end of 2010. Speaking on the bTV channel Thursday morning, he praised Wednesday’s decision of the Cabinet to introduce new austerity measures in order to forgo increasing the 20% VAT by 2%-5%.

The latest austerity plan adopted by the government, which is yet to be approved by the Parliament, provides for reducing state administration expenditures by 20%; it is expected to save the state budget about BGN 900 M by the end of 2010.

Facing The Borisov government chose this option even though in April it adopted an anti-crisis package of other austerity and revenue raising measures designed to offset the emerging budget deficit amounting to BGN 1.6 B in the first quarter of 2010.

The Finance Minister confirmed Thursday his commitment that he would resign if the value-added tax is increased by the end of the year. He did say that there was a chance that the VAT might have to be increased in 2011 but that this was not likely and would depend on the condition not just of the Bulgarian but also of the EU economy.

Commenting on Prime Minister Borisov’s statement from Wednesday in which he urged civil servants to slash their transportation expenses by riding the Sofia subway and public transport in general, Djankov declared his readiness to leave the Ministry car in the garage.

“I met with the Prime Minister last night, and told him there is no metro line connecting the downtown with the Boyana Quarter where I live. He replied that I should ride a bike to work. I have a bicycle, I have brought it from Washington, DC, so you may soon see me cycling down the Bulgaria Blvd. It will be easy in the morning because it is downhill. I have been considering going to work with a bike but if the austerity measures necessitate that, why shouldn’t I go to work by bicycle?,” the Finance Minister said remarking that he will ask Sofia Mayor Yordanka Fandakova to create bicycle lanes along the Bulgaria Blvd, i.e. his potential cycling route.

Djankov also said he expected the plans of state institutions outlining how it each one of them will reduce its expenditures by 20%, and that for his Ministry, this meant finding a way to save BGN 30 M by the end of the year.

One of the austerity measures that he has adopted to achieve this goal is discontinuing the Finance Ministry’s contract with the customs consultancy Crown Agents, which has been supervising the Bulgarian Customs Agency since the government term Simeon Saxe-Coburg (2001-2005).

Djankov slammed Crown Agents for bringing negligible benefits to the state with its activity and that it failed to identify any contraband channels. Even though the government’s contract with the company is confidential, by comparing it with the cost of a modern hospital scanner, he revealed indirectly that the monitoring of the Bulgarian Customs cost the state budget about BGN 0.5-1 M monthly.

The Finance Minister presented as good news the fact that in April 2010, the state owed the business sector only BGN 205 M in unrefunded VAT, saying this was the lowest level of unrefunded VAT since 2007. He claims that the Customs Agency has finally started to do noticeably better in collecting VAT revenues.

Djankov was cathegorical that the news that Galina Dimitrova Peicheva-Miteva, the 27-year-old daughter of Dimitar Peichev, Bulgaria's deputy agriculture minister until July 2009, who was responsible for handling EU funds, got EUR 700 000 from the EU Common Agricultural Policy in 2009, was an outright conflict of interests and a “sacrilege.”

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Tags: Simeon Djankov, VAT, value-added tax, austerity package, anti-crisis measures, anti-crisis program, state administration


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