The best anticrisis measure for the Bulgarian government would be a massive downsizing of the state administration, according to the Bulgarian Chamber of Commerce and Industry (BCCI).

In a statement issued Monday, the BCCI insists that the Borisov Cabinet should abstain from upping the VAT from 20% to 22%-25%, and should focus on slashing the bureaucracy in order to reduce state spending.

According to the BCCI President, Tsvetan Simeonov, the VAT increase will have extremely negative effects on the Bulgarian economy including a boost of the gray economy, evasion of social insurance and corporate tax, and drop in consumption.

Simoenov claims it would be absolutely impossible for the government to collect an additional BGN 400 M by the end of 2010 by raising the VAT by 2%, as forecast estimates of the Finance Ministry. What is more, the hike of the value-added tax is said to have a negative impact on domestic and foreign investments.

The BCCI statement to the media and the government outlines other recommendations and concerns of the Chamber.

One of these is insisting on an administration cut, the argument being the bureaucracy is becoming a burden increasingly draining the Bulgarian state budget as a total of BGN 8 B were allocated to it for 2010 compared to BGN 6,8 M in 2009.

Tsvetanov says this situation contadicts with the promise of the GERB government to reduce the size of the public sector; he claims that the state administration lacks in efficiency, and that private entities are increasingly taking over the services that it is supposed to provide.

The BCCI Chair emphasized the fact that in the 2010 State Budget, the government redistributed about 41,3% of the GDB compared to 38% in 2009, although the GERB party had promised that it would not exceed 35%.

“The BCCI will continue to insist on the initiation of the full payments owed to the business by the government for public procurement projects which have already been completed, as outlined in Measure 22 of the anti-crisis program of the government,” said Simeonov.

He praised the government for taking measures to curb abuses with EU funds but that this move also had a negative effect as civil servants started to do as little as possible on applications for EU funding as they are afraid they might be implicated in “doing things the wrong way,” which general results again in a poor absorption rate.

The BCCI head made it clear that in addition to the measures against illegal activities, the organization is going to propose measures against officials who have failed the absorption of funds within the set deadlines through their inaction.