The truncated state subsidies to municipalities for the past three years have totalled about BGN1 billion. The calculation was specially carried out for the BANKER by an expert from the National Association of Municipalities in Bulgaria (NAMRB).
After three years of fiscal torture of Minister Dyankov over local government, municipalities decided to take matters into their own hands and seek revenge. They are united in their request: after being collected by the National Revenue Agency, part of the income tax paid by individuals and the corporate tax – by companies should remain at their disposal, the expert explained.
These ideas received support ten days ago at the general meeting of the Association. Municipalities agreed on working exclusively for a new law on local government, local taxes and local finances.
The most serious problem for local budgets over the past three years is the chronic shortage of funds. It is caused both by the difficult collection of the due payments due to the crisis and the omnipresent law liquidity, which hit most regions, and – on the other hand – because of the cuts in government subsidies. In 2009, Minister Dyankov refused to pay 10% of the money for municipalities. The following year, the state didn’t pay another 10 percent. In 2011 there was no growth rate of the money paid from the state to municipalities. At the planning of the budget for this year, Finance Minister apparently listened to the complaints of mayors and allowed their 2012 budget to be the same as in 2011. At the same time he slashed by about BGN20 million the funds for capital expenditures of municipalities. The lack of money for repairs and construction of roads and streets halted local development.
The patience mayors is obviously over. Ginka Chavdarova, executive director of the Association of Municipalities believes the revenue from income tax should be divided between the state and the respective municipality in a ratio of 7:3 in favour of the state. After a test period local authorities should possibly seek more courageous ratio reaching up to 50:50. According to her 50 percent of the proceeds from income tax can and should remain in place. Mrs. Chavdarova expressly stated this was her personal opinion, not the one of the Association.
According to the Ministry of Finance’s announcement on the implementation of the national budget for 2011 the total tax revenue for the state amounted to BGN16.2 billion, while the one from direct taxes was BGN3.6 billion which was a sum of BGN2.2 billion from income tax and BGN1.4 lev billion from corporate tax. If municipalities want 20-30% of the BGN3.6 billion lev, this means that between BGN800 million and BGN1.1 billion will have to leave the state treasury and go to local government, which will distribute the sum as needed. This will be a mature decision not only in terms of development of local government in Bulgaria, but also from a political standpoint.
The inflow of additional fresh resources into local governments is also important because it will allow then to repay the huge debt of municipalities to businesses.
More than two thirds of the municipalities in Bulgaria have arrears accumulated mainly during the last two years, said Executive Director of the National Association of Municipalities in Bulgaria Ginka Chavdarova. According to her local authoritieshavealready broken the critical threshold of BGN200 million inobligations.
