Bulgarian Government Adopts Anti-crisis Package

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Bulgarian Government Adopts Anti-crisis Package

The Council of Ministers adopted Wednesday a package of anti-crisis measures, tabled by Deputy Prime Minister and Finance Minister Simeon Djankov, in support of employment, households, businesses and the budget. The package is meant to offset the effects of the economic crisis by achieving fast, tangible and sustainable results and to shore up the budget.

Earlier in the day, the National Council for Tripartite Cooperation (NCTC), consisting of the government, trade unions and employers, adopted an anti-crisis package to sustain economic development. In the presence of Prime Minister Boyko Borissov and Deputy Prime Minister and Finance Minster Simeon Djankov, the Council members voiced support for the measures, debated over the course of several days.

The package that was voted in contains 60 anti-crisis measures. As early as Thursday, it will be submitted to Parliament, said Prime Minister Boyko Borissov.

The approved anti-crisis measures are expected to bring in 1,623 million leva in revenues, CEIBG Chairman Ivo Prokopiev and Bulgarian Industrial Association (BIA) President Bozhidar Danev told reporters after the NCTC meeting on Tuesday.

Prokopiev said that the bulk of receips from the implementation of the measures is expected to come from privatizations, the cuts of spending in the state administration and the sale of greenhouse gas emission units under the Kyoto Protocol.

Employers and trade unions believe that the projections are largely underestimated.

Estimates so far show that a VAT rate raise can be avoided. However, unless unsecured contracts for 2,000 million leva are dissolved, the government will go through with its plans to raise the current VAT rate of 20 per cent, warned the Prime Minister.

Later on Wednesday the MPs of GERB adopted a declaration calling upon Parliament to support the full list of measures.

Following is the full list of measures (the financial effect is given in brackets after each measure):

Fiscal support

1. Securing additional internal and external financial resources in order to stabilize the fiscal reserve;

2. Fast sale of assigned emission reduction unts - up to 50 million t - by the national system for green investment (500 million leva);

3. Privatization of minority residual shareholding in companies through the Bulgarian Stock Exchange; the proceeds go to the public purse (250 million leva);

4. Liberalization of the investment regulations for the Silver Fund and private pension insurance funds for investment in low-risk Bulgarian financial instruments;

5. Temporary revocation of preferences granted to state-financed organizations for VAT- and duty-exempt import;

6. Building public registers for:

- rented out state-owned and municipal property;

- farm land of the state-owned and municipal land stock and

effective land lease contracts;

7. Adopting legislative revisions to increase the term of land lease agreements. Putting up 90,000 ha of land for long-term lease with pre-paid rent and sale of 10,000 ha at public auctions (164 million leva);

8. Introducing a final tax on merchandize awards and cash prizes from games of chance. Delegating the Finance Ministry, upon a detailed analysis and an opinion by the Commission on Gambling and the Association of Gambling Operators, to propose a decision to the government (80 million leva);

9. Changing the method of taxing the insurance premiums in keeping with Article 157 of Directive 2009/138/EC after consultations with the Finance Ministry, the Financial Supervision Commission and the Association of Bulgarian Insurers;

10. Restoring to 1.1 (from 1) the coefficient used in calculating the tax pre-payment under the Corporate Income Tax Act for 2010 (50 million leva);

11. Increasing the dividend payable to the government from government-owned commercial corporations to 80 per cent from 50 per cent by revisions in the Ordinance on Utilization of the National Budget for 2010 (26 million leva);

12. Deducing 50 per cent of the receipts from rents of companies with predominant state-owned or municipal participation, and crediting it to the government or municipal budget, respectively by a procedure applicable prior to 2006 (25 million leva);

13. Doubling the tax for housing units with tax assessed value of over 300,000 leva and vehicles with insured value of over 70,000 leva; trippling the tax due for personal yachts and aircraft (35 million leva);

14. Reducing to 30 days from the effective 75 days the period for which a cash benefit is due for a temporary disability occurring within two months from the termination of the contract of employment (15 million leva);

Limiting public spending

15.Adopting a timeframe for stepped up establishment of an electronic government with a full scope of services to optimize the administration, improve the business climate, curtail corruption, improve transparency and the efficiency of public spending, and reducing all charges for electronic services;

16. Contracting private entities to perform public services;

17. Offering concessions for subsurface resources and road infrastructure by the end of 2010 (15 million leva);

18. Moving for legislation of a 15 per cent cut of the state subsidy for political parties (7.5 million leva);

19. Reducing by 10 per cent the current costs of spending units, except for state-delegated activities in the area of education and social care. Departments which have fulfilled an earlier requirement for staff optimization, the new 10 per cent cut shall not affect the wage bill and other remuneration. The Finance Ministry has a month to put forward the requisite legislative changes (450 million leva);

20. Cutting down any allocations for clothing that are available to state-owned and municipal organizations for 2010;

21. Providing an additional subsidy for the Labour and Social Policy Ministry for social assistance activities;

Financial Discipline

22. Drawing up a schedule for full payment by the end of the first half of 2010 on the part of the state and state-owned enterprises of sums due on implemented public procurement contracts according to the contract conditions, statutory instruments and EU directives.

23. Recovering VAT and excise duty due to companies within the legal time-limit.

24. Accelerated payment of sums from European funds due to beneficiaries, accelerating the acting and launch of new schemes under the operational programmes and national plans with the objective of maximum absorption of european funds. Increase of advance payments up to 40 per cent.

25. Public registers for the sums due on public procurement, VAT, excise duty and European projects.

26. Obligating companies by the signing of annexes to their contracts with the respective contracting authority, following payment on the part of the state, to immediately pay the delayed wages and insurance contributions in compliance with the requirements of the Labour Code and the Collective Employment Contract, as well as the sums due to subcontractors and suppliers.

27. Immediate legislative revisions to guarantee that the period of repayment on the part of the state to the companies will be declared a period without calculation of interest on due taxes and insurance contributions, as well as with the right to access to European projects and public procurement.

28. Simplified procedures and shorter time-limits of procedure on declaration of bankruptcy.

29. The Finance Ministry shall publish:

- every month detailed data about the execution of the revenue an expenditure sections of the budget, with an attached analysis, including the balance on VAT;

- every month detailed information about the developments on the country's foreign debt with attached economic analysis;

- every month detailed information about the condition of the fiscal reserve, broken down into foreign currencies and current profitability;

- every quarter the Finance Ministry shall collect and publish information about the financial results of all majority state-owned companies.

30. The staff of the Public Financial Inspection Agency shall be increased by 10. The same shall shortly begin inspections in Bulgargaz, the National Palace of Culture, the National Electric Company and Bulgarian State Railways BDZ.

Additional Financial Resources for Enterprises

31. Increasing the funds handled by the Bulgarian Development Bank, with no less than 60 per cent of the financial resources channelled towards SMEs. Analysis of the opportunity for the bank to use part of the network of Bulgarian posts.

32. Endorsement and launch of the system of company trade with carbon dioxide quotas. Regulation of financial reporting and tax treatment of deals with emission quotas in European trade.

33. Adoption of amendments and supplements to the Regulations on the Application of the Investment Promotion Act which will reduce considerably the currently existing limits of awarding certificates class A and class B for high-tech activities defined by Eurostat, as well as for investments in municipalities with unemployment equal to or higher than the national average;

- introduction of lower threshold for investments in research,

education, health care, IT and artistic creative activity in the

field of culture;

- regulation of concrete conditions for issuance of certificate

and promotion with a package of measures of priority investment

projects in all sectors of the economy in compliance with the

requirements of the new General Block Exemption Regulation No.

800/2008.

34. To consolidate the financial independence of municipalities and introduce the quantity of generated waste as the single base for calculation of the household waste fee by amendments to the Local Taxes and Fees Act within the procedure on budget 2011.

35. Easier visa regime for the citizens of Russia and Ukraine in compliance with the most liberal European practices.

Support of Household Income

36. Establishment of a mechanism for raising the minimum salary as of July 1, 2010 which will include both economic and social parameters.

37. Eradication of the limit of unemployment benefits as of July 1, 2010 and setting the level of benefits as 60 per cent of the contributory income before the loss of job. Introduction of obligation for unemployed to register at the relevant labour exchanges within seven days.

38. Streamlining the distribution of food vouchers between operators by eradication of the quota principle. Analysis within 45 days of the effects of increasing the number, amount and expanding the scope of food vouchers as a mechanism for supporting the real income of workers and employees. The analysis should also show the effect of introducing a system whereby employers will receive a voucher for every new job.

39. Efforts for temporary limitation of the increase of state-regulated prices of goods and services of public interest.

40. A mechanism for guaranteeing the funds of insured persons with the additional pension insurance funds held in deposits at Bulgarian commercial banks following coordination with the Bulgarian National Bank and the Financial Supervision Commission.

41. Approval of additional budget funds from the budget of the Ministry of Labour and Social Policy for funding the opened soup kitchens under the procedure of the Social Assistance Act for the period from April 1 to April 30, 2010.

Labour Market

42. A set of measures applicable until the end of 2010 and funded under the Operational Programme Human Resources Development and the executive budget for preserving employment at enterprises experiencing difficulties in the production and sale of their produce by:

- the introduction of flexible working hours;

- specific leave for economic reasons;

- guaranteeing the rights of the dismissed workers after applying the measures of flexible and adapted working hours to receive the compensations due pursuant to the Labour Code, calculated on the basis of the gross salary for the month preceding the one in which the flexibility measures were applied.

43. Provision of additional funds for subsidized employment under the National Employment Plan.

44. Increasing workforce mobility by development of a system for monitoring and distribution of qualified workers and employees at sectoral and territorial level.

45. In the cases where an employer temporarily commissions other work in the same or another enterprise, the period of 45 days is increased to 90 days within one calendar year until the end of 2011. The agreement of the worker is required after the 45th day.

46. Limiting access to the labour market of workers from third countries, with the exception of highly qualified ones.

47. Mechanisms under the Operational Programme Human Resources Development for finding first jobs for young graduates.

48. Introduction of legislative regulation guaranteeing fair competition and not allowing market distortion by monopoly pressure on suppliers of goods and services after the example of EU member-states.

49. Detailed review of enterprises threatened by closure because of incompatibility with EU environmental requirements and development of measures for permissible state support.

50. Collection by the National Revenue Agency of information about unpaid salaries and provision of summarized quarterly data by economic activity, region and at national level.

51. Exercise of the right of the Minister of Labour and Social Policy to extend the application of the collective agreement to all enterprises of the respective industry or branch. Criteria for representation capacity of branches and sectoral employer organization should be developed in parallel.

Social Insurance Systems

52. Temporary suspension, until the end of 2011, of the reduction of insurance contributions.

53. Formation of general principles for the further development of the pension reform to achieve financial stability and autonomy of the system with involvement of insurance benefits with contributory payments, with a long-term objective of 75 per cent replacement rate. A concept for pension reform shall be prepared an tabled for discussion by the National Council for Tripartite Cooperation.

54. Stage-by-stage establishment of the principle that the established minimum salary level guarantees the right to minimum pension for contributory experience and age.

55. Increasing the sums paid under the procedure of the Act on Factory and Office Workers' Claims Guaranteed in the Event of Their Employer's Bankruptcy for 2010 from 720 to 1,000 leva.

56. Waiver of increasing health insurance contribution. Introduction of electronic patient health card by the end of 2010. Drastic measures for control and increasing collectibility of funds in the budget of the National Health Insurance Fund (NHIF).

57. Persons without health insurance on other grounds shall pay insurance contributions calculated on the income from capital and property.

58. Introduction of tripartite management of NHIF. Joint definition of the concrete steps and stages of health reform to guarantee access to quality health care. A concept of the health care reform shall be tabled for discussion by the National Council for Tripartite Cooperation by May 31, 2010.

59. Putting off the rise in supplementary payments to the pensions of elderly aged above 75 and of surviving spouses by amendments to the 2010 State Budget Act and the Social Insurance Code.

60. The first three days of temporary disability to work shall no longer be paid by public social insurance with a view to avoiding malpractice with the insurance system.

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