“No one eats computer programs”. This is the title of an article published in the Bulgarian socialist newspaper Duma, accusing software developers of having a too high standard of living and proposing a progressive taxation regime and additional taxation rules for foreign IT companies and people employed in the sector. “If an additional tax of BGN 1000 per month (on average) is added to one programmer for 40,000 people, we get an additional BGN 40 million, which could be included in the redistribution! And with the current incomes of these workers, this will not be a big burden for them. I think that would be fair to the people whose taxes were spent to educate these professionals,” concludes the author, who claims to have graduated
National economic planning and statistics from the University of National and World Economy at the time it was still called Karl Marx.
Of course, we couldn’t resist asking the tech community about their opinions. While in the biggest online IT community of DEVBG the article provoked a series of emotional comments, we decided to collect well-reasoned positions (everyone is welcome as long as there’s some substance):
Svilen Rangelov, co-founder of Dronamics
The sad truth is that it can appear deceptively easy to discuss things like flat tax rate and the currency board – they are simple and straightforward enough on the surface to lead even people who are incompetent to believe they are competent on the topic. This is one such case – the original article’s author is clearly misinformed and also wrong, and it’s a real shame that such baseless opinions like his are given a platform.
First, proceeds from the personal income tax form 11% of all State revenue, which is a tiny amount, compared to the proceeds from indirect taxes like VAT (31%), social security contributions (30%), and excise taxes on alcohol, tobacco and petroleum products (15%) (source: https://www.kolkodavam.bg/taxes-info), each of which also directly impacts the purchasing power of individuals.
So, even the author’s dream comes true and that 1.27 % of formally employed persons (those 40,000 employees represent) end up being taxed at a higher rate than the remaining 98.73% of the workforce, it’s not going to make any noticeable difference for the State budget (but it may make the author happy to see some neighbors suffering).
In fact, due to the high rates of VAT, social security and excises, high-income earners also contribute more to the state budget than low-income earners, so this additional BGN 1,000 in personal income tax will be canceled out by the reduced state income from VAT and other contributions, as the evil overpaid programmers will simply be spending much less.
Second, the fact that professionals in one area are paid on average more than professionals in other industries is not a bug, but a welcome feature of a healthy market economy – something we should all be encouraging, but I can see how that’s not what the self-proclaimed “well-informed” author was being taught in the Higher Institute of Economics “Karl Marx”, where they were also teaching how the atrocities of the criminal forced redistribution during the days of The People’s Court were amazing achievements of social and economic progress. So, that probably explains why the author’s horizon is his neighbor’s pocket.
Last, but not least, if the author is being socially insured at his actual income level, he’s a lucky one – the reality in Bulgaria is that still a large proportion of the workforce is declaring they receive the minimum salary level in order to save on their (and their employer’s) social security and tax contributions, and receive large portions of their salaries in cash “under the table”, avoiding the bank system and any mechanisms for tracking and enforcement of tax collection. The IT industry, on the other hand, overwhelmingly does business for clients abroad and gets paid via the bank system, so even if it wants to abuse the system like other industries are notorious for doing, it can’t.
And since all the companies that hide those taxes obviously misdeclare the data they send to the National Statistical Institute (NSI), it is not only possible but very likely that the difference in average income between different industries and the IT sector is much lower than the official data shows. The author would be wise to remember that people were buying upscale apartments long before the IT industry reached its current scale in Bulgaria. Why his own personal income didn’t progress as fast as his new neighbors’ is a question for him to ponder, not for the State to solve.
Vassil Terziev, investor, serial entrepreneur, co-founder Telerik Academy*
* Originally posted on Facebook, published with Terziev’s permission
I haven’t had such fun for a long time before reading this 🙂
One appeal to all my online and offline friends – don’t judge the author of the article and don’t fret. It is a pure waste of energy because the author will not change his views, and you will not change anything, wasting time commenting.
Try to do something practical and 1) set a reminder to vote at the next elections 2) try to persuade all your friends to vote, and 3) think hard about who to vote for. Before the last elections for mayor of Sofia elections, many of my friends explained to me they would vote for Maya Manolova (who was supported by the Bulgarian Socialist Party – ed.n.) to “blow up the status quo”. Change is needed, but unfortunately, some changes result in a worse status quo. It is not bad to be aware of this.
Invest your time in real change. Our only chance is not to correct the “crooked cucumbers” but to infect the youth with other values. Any person who believes in the creation of good and adding value and understands their constructive role in this process is a precious victory and we have a responsibility to this battle. And we can determine its outcome!
In many ways, I may have leftist beliefs and advocate for wise social policies. But …. whether you are left or right or center, it all starts with MAKING money and only then thinking about redistribution. In order for more to be allocated, those who create value must be assisted. I have a problem with all politicians, no matter what party they are, who do not understand this simple thing.
P.S. The author is probably a troll. Such a person is not on the list of Duma authors. The question remains why this article was written. Maybe to find the “enemies of the people”? 🙂
Ivan Stefanov, co-founder of Notolytix
Let’s cut the emotional part and put a more objective spin on this.
- market pressure – Seriously, I thought this is how market economy works, supply and demand..but then again if I step into Gargov’s shoes and his fellow party members, it probably looks like that – I am retired or stuck at a dead-end governmental or city job, refusing to develop any new skills – then yes, it really feels like you are falling behind, as you should be. The same happens in nature, Darwin defined it as survival of the fittest.
- Intellectual drain of the nation (интелекруално обезкъряване на нацията) – Come on, this is just ignorant. That very same software and fintech industry that made its first steps in Bulgaria in the 90s actually developed generations of super qualified engineers that now build world-class products in BG. The fintech in BG is no longer just a dev hub for foreign companies but actually it spawns many new products.
- Nobody eats computer programs and internet sites – yeah, it is not AK-47s, but this does not make this statement less retarded. Again, given the audience of Duma and the electorate of the political party behind this newspaper makes total sense. I am not even going to comment on it…
- Western companies are benefiting from talent whose education is paid for with the people’s money?! – Folk’s money, really, simple look at the financial figures of the social security institute that show a huge chunk of taxes is paid by the IT industry, taxes that the state uses to fund universities…so not sure what is being given away here…
- Bringing back progressive tax and an additional tax of $ 1,000 for each developer – certainly, the time for this will come, hopefully, when this day comes, HENRY’s will receive more for their taxes but also the social security they deserve for their high contribution. This will not mean less inflation or less new neighbors.. or the state giving free money to socially weaker groups…
Well, that’s enough I guess, I have to put some pressure on the market now.