One way to deal with high inflation is to support production and introduce tax breaks. Reducing VAT on food will increase collection and brighten the industry. The introduction of a “Green Certificate” at around 20% vaccination is a mistake that can lead to a slowdown in economic development.
This was stated in an interview with BGNES by the financier Plamen Danailov, who was an MP from “There Is Such a People” in the 45th and 46th National Assembly, as well as a candidate for Minister of Finance.
“The three crises – health, energy and high inflation – are not just happening in our country, they are linked globally. Bulgaria follows the trends that are happening all over the world,”Danailov said.
He pointed out that due to the huge printing of money in the last year and a half, high inflation was easily predictable. According to him, one of the ways to deal with it is to support production. This process is largely within the capabilities of the Bulgarian government and does not depend on foreign support. This can be done in two ways: 1. through direct subsidies aimed at enterprises; 2. through tax reliefs, the financier pointed out.
According to him, direct subsidies are more likely to fail and even lead to additional problems.
“If tax breaks are introduced, they can help manufacturing companies. I will give you the following example. TISP held meetings this week with representatives of the branch organizations of bread producers and milk producers. They offer, and in their proposals there is quite a reason, a reduction in VAT on food products. This would also hold back inflation to some extent, because with the reduction of VAT it will be possible to keep the growth of prices,”Danailov said and added:
“Of course, this is within the capabilities of a National Assembly. I hope that we will soon have a functioning parliament and an elected government and that we will move in that direction.”
The other instrument that can reduce inflation is to raise interest rates, but this cannot happen in our country because we are in a currency board and we follow the common European policy. “If the ECB starts raising interest rates, this process will inevitably come to us as well. This will take some of the money in circulation and will certainly reduce inflation. However, this can cause other problems. In the medium-term framework 2022-2023, there are no indications for raising interest rates,”said the financier.
According to him, it is best for the euro to be adopted when we have real convergence, ie. our incomes are close to the European average.
“Apart from the fact that we currently do not have our own monetary policy, the BNB can have very little influence. Once we join the eurozone, much of the scope for fiscal policy will diminish even more. That is why at the moment it is good to equalize our income levels with the average European ones and then to adopt the single currency. I am not saying that we should not join, but we should do it at the most convenient moment for us,”Danailov said.
In the next National Assembly, “There Is Such a People” would engage in a policy related to reducing the VAT on food.
“Unfortunately, this is no secret to anyone, in a large part of the food industry, non-issuance of invoices when making deliveries is a common practice. If we reduce the VAT rate, the example of Romania shows that the gray sector is shrinking a lot. In reality, VAT revenues in the budget are compensated within one or two years, regardless of the reduced rate. The clarification of the sector leads to greater collection and from there not to lose funds in the country,”said Plamen Danailov
With regard to vaccination against COVID-19, the position of “There Is Such a People”, which was also expressed in the 46th National Assembly, is that it should be voluntary.
According to him, the big mistake – both of the GERB government and the caretaker cabinet – is the lack of an explanatory campaign to explain to people the benefits of vaccination. And based on that, everyone can make an informed choice. The problem at the moment is that there are too many sources of information and it is difficult to make an informed decision. Therefore, vaccination against coronavirus should be voluntary, he said.
“My personal opinion as an economist is that for about 20% of those vaccinated, introducing a ‘Green Certificate’ is a mistake that will slow down the economic recovery that we have seen occurring in the second and third quarters. A number of small businesses can experience serious problems and be brought to bankruptcy,“Plamen Danailov warned.
The 47th parliament will certainly begin by examining the state budget. Other important priorities are encouraging investment through tax breaks, especially in the high-tech sector.
Plamen Danailov also called for the introduction of family income taxation, which would help young families to transfer part of the tax. He also defines the latter as a personal cause for dealing with the “demographic death”, because he himself is a father of three children.