Topical Information

The NAMRB Management Board discussed the parameters for financing municipalities reached within the negotiations with the Ministry of Finance on the draft Budget 2023 and adopted an opinion on the main package of tax laws submitted for public consultation.

In March and April, the management of the Association held two meetings with the team of Minister Rositsa Velkova, during which the amounts of subsidies and transfers to municipalities were discussed. The draft budget provides a resource for remuneration of the teams working on projects funded by the Recovery and Sustainability Plan, which was one of the insistences of NAMRB. The limited number of experts in local administrations and the parallel launch of EU-funded programmes and Recovery Plan projects has created tensions on the ground. The projects under the HEP do not provide funds for their management, which created a risk for their successful implementation. In the draft budget proposed by the Ministry of Finance, this case is resolved, which was welcomed by the mayors.

The estimates of the Ministry of Finance provide for an increase in transfers for local activities, the standard of municipal administration and the target subsidy for capital expenditure. At the proposal of NAMRB, a target component of EUR 50 million is also envisaged. Lv. to compensate for the growth of the minimum wage in local activities, which is distributed among all 265 municipalities. If the proposals are voted on in Parliament, municipalities will have the opportunity to overcome the crisis in the implementation of projects with a construction component, caused by the sharp increase in the prices of building materials and labor costs.

The draft budget provides funds for financing municipal projects to improve ambient air quality in connection with the judgment of the Court of Justice of the European Union in Case C-174/21. For 2023, the necessary funds for the payment of benefits on the basis of the Labour Code to mayors and mayoral deputies at the expense of the central budget for 2023 have been calculated under terms and conditions determined by the Council of Ministers.

The members of the Board of NAMRB also discussed the criteria for determining municipalities with financial difficulties. As such, it is envisaged to be considered those for which at the end of 2022 the overdue liabilities to suppliers in a reporting group accounts for European Union funds exceeds 50% of the reported at the end of the year expenses under the budget of the municipality. Mayors of municipalities will have to assess the presence of these conditions by June 30, 2023. The Board of NAMRB decided in the opinion on the bill to express an objection to this new restriction, as it refers to an already completed budget year.

In the draft state budget is adopted the proposal made by NAMRB to cancel art. 17 b. of the Municipal Debt Act, on the debt limit under long-term contracts with guaranteed results (ESCO contracts).

It is important for the municipalities that the budget of the Ministry of Regional Development and Public Works under the budget program "Policy for improving the investment process, maintenance, modernization and construction of the technical infrastructure" envisages 3.9 billion. Lv. - by EUR 1.4 billion. Lv. more than the previous year.

The NAMRB Board voted on the texts of the Protocol on the consultations between NAMRB and the Ministry of Finance on the draft Law on the Functioning of the Republic of Bulgaria Act. 77 of the LPF and made additions to be entered in the final version. It practically concludes the procedure for negotiations on the amount of funds for municipalities in the draft State Budget of the Republic of Bulgaria Act, prepared by the Ministry of Finance.

The NAMRB management of noted the extremely constructive approach of Minister Rositsa Velkova and her team to the problems presented by NAMRB in the course of the negotiations and expressed gratitude for the professionalism and mutual trust.

The NAMRB Board also discussed the position of the Association on the amendments and supplements to the Tax and Social Security and Procedure Code (TSSPC) published for public consultation. The transitional and final provisions of the Bill also propose amendments to the Corporate Income Tax Act, the Personal Income Tax Act, the Excise Duties and Tax Warehouses Act and the Limitation of Cash Payments Act. The changes are proposed in order to increase collection and more effectively counteract tax fraud and tax evasion.

The Association supports most of the provisions that provide for additional revenue sources, improvement of collection and elimination of imperfections established in practice. Such are the texts for supplementing the data on debtors with outstanding public debts, which are published; the limitation of interest on public claims for which the principal amount has been extinguished, in whole or in part; unification of the approach and collateral for natural and legal persons, etc.;

With regard to the proposals for improving the control regime, NAMRB notes the need to achieve equality of public receivables of the state and municipalities and proposes to improve coordination, including with regard to the provisions in other regulations.

During the meeting of the NAMRB Board held on April 25, 2023 in Sofia, specific proposals for amendments to the LMSMA were also discussed, which concern the introduction of some of the elements of the financial decentralization model and ensuring a more effective exchange between the registers of the Ministry of Interior, the Ministry of Finance and the municipalities and between the registry offices, notaries and municipalities in order to optimize administrative processes and more transparency and control over taxation.