The chairman of the “Vazrazhdane” group in the Capital City Council and current economic adviser to the “Vazrazhdane” parliamentary group – Deyan Nikolov, commented at a meeting with Bulgarian entrepreneurs on the decision of the Minister of Finance to propose lower threshold of cash payments. This was announced by the political force.
The proposal is part of a major package of tax law changes, which have been submitted for consideration in the National Assembly. The legal change refers to Art. 3 of the Law on Limitation of Cash Payments and is for lowering the threshold for cash payments from the current BGN 10,000 to BGN 5,000.
“Revival” strongly opposes this change, because it will be hindering and limiting business turnover.
The objective stated in the Finance Minister’s proposal to increase the transparency of payments and curb the shadow economy sector is well known government-imposed “mantra”, which is rather wishful thinking. Paying cash doesn’t necessarily mean payment without issuing a primary accounting document, including a fiscal receipt, as in many cases the payer is strongly motivated to require such a document. Quite logically, this incentive is expected to grow as the amount increases.
We are skeptical that the change implemented in this way will serve the intended purpose, because it could encourage traders to fragment financial transactions through several contracts. Undoubtedly, however, the proposal will lead to a new administrative burden for entrepreneurs who they will need to install POS terminals at their sites and pay more fees to the banksalso pointed out from the PP “Vazrazhdane”.
“The proposal submitted for discussion is not accompanied by an analytical model with a numerical analysis-calculation of the proposed change, and accordingly it does not provide an answer to many essential questions:
– Why is the new threshold exactly BGN 5,000, and not, for example, BGN 4,000, or BGN 6,000 or BGN 7,500?
– What were the numerical effects of “brightening” the economy from similar measures in Bulgaria in the past – when the payment threshold was introduced in 2011 (when the threshold was set at BGN 15,000) and when the threshold was changed after that (the current threshold of BGN 10,000 applies from 2016)?
– What is the expected net fiscal effect of the proposed change (one-time and/or for some period) by the Ministry of Finance?
– What specific (or in some numerical range) “brightening” of the economy is expected as an effect of the proposed change?
“The so-called published by the Ministry of Finance “Partial Preliminary Impact Assessment” for proposed tax changes is a typical bureaucratic document that does not address the above problems”said Deyan Nikolov.