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Greek scenario awaits Bulgaria if corruption model stays

Photo: capital.bg

Ten years after the start of its membership in the European Union Bulgaria remains the poorest country in it with a minimum monthly income of 235 euro. Why is Bulgaria lagging behind countries like Romania (€ 319), Lithuania (€ 360) and Estonia (470 euros), which were at the same level as Bulgaria at the start?

To answer this question, economist Kiril Petkov refers to the global index of corruption and concludes that over the past 10 years the phenomenon has been growing in this country. If corruption was reduced to the level of Slovenia, people in Bulgaria would be 50 percent richer.

The negative effects of corruption do not include just misappropriation of public funds, but also a number of missed opportunities, says Harvard graduate Kiril Petkov and gives as an example the wasted chance before this country, associated with the introduction of 10 percent corporate tax.

“It makes sense to position a European company in Bulgaria in order to make sales and exports throughout the EU enjoying the lowest corporate tax,” Kiril Petkov says. “If corruption was not so widely spread, we would see a huge number of European companies paying taxes here. One such company in Plovdiv, for example, is responsible for 1/800th of total revenue from corporate tax. So if we had 800 such companies, this income would be doubled and problems like low pensions and wages, bad healthcare and education would be solved. But because of corruption and a dysfunctional justice system people say that the risk of moving a business to Bulgaria was too great and these finances never reach our budget.”

Large-scale corruption deals such as the case with bankrupt CCB, scandalous procurement procedures and whatnot - all these deter investors.

“It is amazing how Bulgaria lost 2 billion euro through CCB and what would have happened if this money was invested,” Kiril Petkov adds. “There are 60 loans behind CCB and many questions - who are these 60 people and why was no one sentenced. How come the head of the bank is in Serbia and cannot be questioned. Another example is linked to fuel monopolies and cartels. In 2015, Lukoil has made sales totalling 2.5 billion euro through Neftochim but at the same time it reports losses of 61 million euro. How is it possible to have such a loss at such high sales? And another question – are all procedures related to infrastructure building conducted in the best way?”

According to Kiril Petkov, the solution lies in the hands of the executive power. If it was willing to change the status quo, it could start VAT fraud investigations and investigations over undeclared income. In order for this to happen, however, the National Revenue Agency needs an independent head, who should focus first on large companies as a source of the highest revenue to the budget. According to the economist, if Bulgaria continued on the same path and GDP stays low, nothing good would come out of it.

“Since 2011 Bulgaria has doubled its state loan and if it continued to do so every five years, it would fall into a debt spiral,” Kiril Petkov says. “That is why we should say ‘no’ to corruption models, focus on competitiveness in exports and stop relying on foreign loans and EU funds, which will be gradually reduced. Every Bulgarian needs to understand that there is no stability anymore. We either change the model and progress, or we fall into a Greek scenario, which is not impossible.”

English: Alexander Markov




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