How Much Social Security Should Rich Bulgarians Pay?
How can the Bulgarian state force wealthy Bulgarians to pay bigger social security contributions?
Increase the upper earnings limit, this is the way to go. Also this is only one of the tools the state can use to improve the cashflow into the National Insurance Institute.
Under local legislation, Bulgarian citizens pay social security contributions for earnings of up to 2 200 levs per month. There is no additional payment if the monthly income exceeds that sum.
During its pre-election campaign however the Socialist Party promised to push that limit up to 3 100 levs.
If we want fair play, the first step should be to abolish completely the upper limit. The amount of social security contributions should depend on the amount of the monthly income. This is the only way to diversify Bulgarians’ social security costs.
That may sound revolutionary. But if we are to believe Social Affairs Minister Hassan Ademov no issues are taboo, so the government may well consider that option as a reaction to the social and economic crisis Bulgaria is going through.
Before that however legislative changes should be rushed through parliament to crack down on businesses evading social security payments.
"This type of scheme works wonders in Asia, why not emulate it."
Why not? For the same reason that so many people are continuing their demonstrations here - the scheme you describe presupposes that the money won't be siphoned off by dodgy "businessmen" and their stooges.....unfortunately in the present state of Bulgaria that just ain't gonna happen. :((
The trick with social security is to make everyone a winner, something like the Singapore way.
After tax everyone makes a contribution, say 10% (maybe less in early years of the scheme). Some will be deducted for health insurance the rest is held on account. Everyone is given an account and the contribution record is kept. A low rate of interest will be added to the account. There need be no upper level limit except perhaps on the health deducted portion. Ie the wealthy accumulate even more savings. Upon retirement age the cash is then paid into an annuity but in the meantime the government will accumulate a huge slush fund with which to drive the countries welfare forward. In Singapore there are various schemes for those with large accumulated deposits including mortgage and alternative investments but the whole of the equity remains in the account. In many years time all Bulgarians will start to feel the wealth generated and the government will gain from day one. As the poorest will feel the initial pain of such a scheme it must be applied slowly to the lowest earners.
This type of scheme works wonders in Asia, why not emulate it.