A few weeks before the 2010 draft Budget must be tabled in Parliament, Finance Minister Simeon Dyankov seems keen to try almost everything in his attempts to find fresh money for Bulgaria’s 2010 spending. 

First came his plan to hike excises on cigarettes, then on October 5 it was announced that 15 per cent of state administration employees would be axed, and then it emerged that the Government also wanted to tap more out of earnings from distilled spirits.

A week after the Finance Ministry slipped the media the unofficial information that it planned to raise the excise on cigarettes to 76 euro for 1000 cigarettes from January 2010, another leak said that Dyankov wanted to raised the excise duty on spirit liquors.

Both times, these intentions were badly received by the respective industries, who shared the argument that raising excise duties would boost contraband dealings. They even suggested that excise duties on beer and wine should also be increased because consumption of these has grown considerably in recent years. 

Dyankov’s counter-argument was that customs’ administrative capacity had been reinforced, precisely to cut back contraband.

Others, such as representatives of the right-wing Union of Democratic Forces, saw scant logic in Dyankov’s efforts to increase excise duties to finance the country’s much-troubled health care and pension systems. According to Dyankov’s plan, the money from the increased excise duties would be used to cover the deficits in both systems, but most notably in health care, where there was a gap of 600 million leva looming in 2010.

The increased cigarette excise duty is supposed to bring in 130 million leva in 2010, to be given to the health minister, who will decide how to spend it. The rest of the gap will be covered by money from the raised excise duty on liquor and other budget cuts.

On the subject of finding money for the pension system, Dyankov drew criticism from trade unions and right-wing parties.  According to the UDF’s Ivan Neikov, who was social minister in the right-wing cabinet which started Bulgaria’s pension and health care reforms nine years ago, Dyankov’s actions looked more like  emergency ad-hoc measures rather than well-thought-out, constructive and radical reform. 

On October 7, Neikov told Re:TV channel that without a general view and a long discussion on how Bulgarians wanted to see their social-security system, things would hardly change and the deficit of the National Social Security Institute, currently at three billion leva, would keep on growing. "One cannot expect to finance the social security system with money from excise duties," he said. If the system of financing did not change too, it did not matter where the money would come from, because it would be ineffectively spent, Neikov said.

Another of Dyankov’s ideas, which was among his party’s election promises, is to lower the mandatory social security contributions to ease the burden on business in times of crisis and to make people pay their social security contributions on their real salaries. This was garnished with the idea of raising the retirement age for women from 60 to 63 years, to match that of men, a view shared by the International Monetary Fund.

This view, however, was not shared by trade unions and Social Minister Totyu Mladenov, who described the idea as dangerous in a time of crisis. According to Neikov, raising the retirement age would be meaningless without changing the system so that workers would be motivated to stay and work longer. The current system, where workers saw no point in paying the full amount of their social security contributions because they knew the money was being used to cover the system’s ever-growing Budget gap, was not fertile soil for such a reform, he said.