Lower Salaries, Layoffs Loom as Bulgaria Hikes Social Security Burden

Business | October 19, 2010, Tuesday // 12:45|  views

A supporter of Bulgarian Trade Unions holds a cross with text reading 'Mining' during a protest rally in Sofia , Bulgaria 07 October 2010. Photo by EPA/BGNES

Bulgaria's employers plan to cut wages and lay people off to make up for the increase in social contributions payments by 1.8 percentage points as of next year, a survey shows.

"The proposed 1.8 percentage points hike in the social security burden will not increase revenues into the budget as most mining companies will try to keep flat their financial results by cutting salaries or laying off people," Ivan Andreev, executive director, of the Bulgarian Chamber of Mining and Geology, told investor.bg.

According to Iliya Keleshev, chairman of the Bulgarian Branch Chamber - Machine Building, the increase in social contributions payments will only drive away foreign investors.

"This is not a sharp increase, but it creates a feeling of insecurity," he said.

The idea for a hike in social contributions payments has also sparked an outcry from tour operators and hoteliers, who say that coupled with a flat 9% value-added tax (VAT) in the tourism sector, this measure will deal a deadly blow to the sector.

"The increase in taxes and the social security burden will kill our business" said Iliyana Shtereva, member of the Managing Board of the Tourist Association "Bansko".

"In tough economic times, luxuries such as vacations are often the first to face the axe as consumers rein in spending. If the government really believes the tourism sector to be a priority, this should be reflected in its policy. What Bulgaria is doing now is just the opposite and as a result the country will not be competitive."

According to Shtereva the proposed measures will impact negatively the staff, the quality and price of the services offered.

Bulgaria's government, representatives of the employers and trade unions agreed on Sunday to increase by 1.8 percentage points social contributions payments as of next year during talks.

Bulgaria's government backtracked earlier this month on plans to increase social contributions payments by 3 percentage points as of next year to 31.5% in the face of strong resistance.

An overwhelming majority of Bulgarian employers - a whopping 95% - have taken a firm stand against the government's plans for an increase in social contributions payments, a survey shows.

The managers recommend that the government boosts revenues to the budget by cuts in the state administration, sale of state-owned stakes in enterprises, emission trading and concessions.

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Tags: tour operators and hoteliers, Bulgarian Branch Chamber - Machine Building, growth, recession, GDP, VAT, Boyko Borisov, Simeon Djankov, finance minister, Bulgarian Industrial Association, Confederation of Employers and Industrialists in Bulgaria, pension, social contributions payments, Bulgaria, employers, trade unions, Bulgarian Chamber of Mining and Geology, taxes, social security burden


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