Cause and Effect in European Politics and Law

Decentralised centralisation

Adelina Marini, July 15, 2009

The decentralisation in Bulgaria has not even started yet or at least not at the desired level, which leads to an increase of the administrative burden over business. This is one of the conclusions of the first of its kind research about the business conditions in the 28 districts of Bulgaria, done by the non-governmental organisation Institute for Market Economy (IME) and financed with eurofunds. The reason for this conclusion is that a large part of the local taxes go to the republican budget (on central level) and only 3-4% remain the budget of the municipality. The situation in Switzerland, for example, is exactly the opposite - 60% of the income of a municipality comes from local taxes. Some 30% of all municipal income in Germany, Sweden, Denmark, Poland and Hungary comes from taxes, the research also shows.

The fact that local authorities cannot make their own tax policy makes competition among different municipalities almost impossible. Another factor for the lack of competitiveness is that there is no public information where the conditions for doing business are the best. This is the first research which arranges all the 28 districts of Bulgaria, according to administrative burden (taxes, regulations), quality of services and corruption. In the index IME created the existence of e-government and e-services is also included.

The town that has performed best in the index is Targovishte, followed by Vratsa and Gabrovo. Sofia, where almost half of Bulgaria's population lives or works (especially during the working days) is on the 19th place, due to the high corruption. Instead, the capital is among the first with regard to e-government and local taxation, although the garbage tax is the highest.

Small towns are doing much better in the index exactly with regard to the corruption indicator which is much bigger in the cities, especially Sofia and Varna. Metodi Metodiev from the IME said that in small municipalities the word corruption is not that common. Widespread are the family or friendly relations which are not perceived by locals as anything wrong.

And regarding the e-government the economists from IME say something very important and that is that, according to the EU standards, there are several generations of service provision. In Bulgaria we have maximum second level. The first generation is providing of information. Each municipality has an Internet site. The second generation is unilateral interaction, which means that you can file a request but you cannot receive a feedback. The third generation is complete interaction and the fourth - transaction.

46% of companies claim that they have trouble in working with the municipal administration especially when it is to request a construction permission. The variations across the country differ seriously. For example in Blagoevgrad 100% of the companies share this problem while this percentage is 10 in Vratsa. In the same time the researchers say that small companies complain more often, compared to large companies which is an indicator that big companies may be use other ways to solve their problems.

However, companies, according to an opinion poll, also complain from another municipal service and that is an estimation for the impact over environment which is absolutely crucial for the opening of a factory or any kind of production. The most common complaint is that municipalities do not comply with their own deadlines and 44% of the companies say that the requirements to get this estimation are most of the time unclear and confusing. And again - the big companies complain much less than the small ones.

And more from the index: Gabrovo is leading with lowest tax on cars and Haskovo is with the highest tax on crafts and real estate. In the same time Haskovo has the lowest garbage tax and highest is in Gabrovo.