Bulgarian Economist Warns: Raising Taxes Won’t Solve Deficit, Efficiency Is Key

Economist Dimitar Chobanov has stressed that Bulgaria should focus on adjusting public spending rather than raising taxes. Speaking to Bulgarian National Radio, the Expert Club for Economics and Politics member highlighted that while tax collection is important, the effectiveness of budgetary expenditures is equally crucial. He pointed out that Bulgaria is currently experiencing significant inefficiency in how the state spends, and simply increasing taxes would not resolve these structural issues.

Over the past five years, spending has grown rapidly, particularly in salaries for public-sector employees and pensions. Chobanov explained that this has created a structural imbalance: the budget deficit stems not from insufficient tax collection, but from expenditures exceeding the economy’s capacity to generate revenue. “The solution is not to increase taxes, but to adjust spending,” he said.

Chobanov also emphasized that Bulgaria’s tax system, particularly the flat personal income tax, functions effectively. “Over the last 18 years, since the flat tax was introduced, the system has provided predictability, which is vital given the current deficit and the need for reliable revenue planning,” he noted. He pointed out that the personal income tax is among the few taxes implemented exactly as planned in the 2025 budget, highlighting its reliability.

The economist stressed that the overall tax system should aim to support economic growth, maintain relatively low costs for revenue collection, and ensure fair distribution across different types of taxes. Studies show that systems encouraging economic stimulus generally rely on lower direct taxation and slightly higher consumption taxes - a model Bulgaria has long followed. “Compliance with EU requirements also remains essential,” Chobanov added.

Finally, he warned against increasing state spending without first improving efficiency. “We should not put the cart before the horse - raising incomes first and only then looking for ways to fund them is the wrong approach,” he said, underlining that budgetary discipline and smart allocation of resources are more important than simply increasing revenue.

Source: BNR interview