Financial decentralisation - a potential gamechanger for Bulgarian municipalities

Local administrations could be looking at a 650-million-euro boost to their budgets as early as 2023

Bulgarian municipalities can expect an additional 650 million euros in their budgets thanks to the financial decentralisation plan of the Bulgarian government. This is the conclusion of Troyan Mayor and Deputy Chair of the National Association of the Municipalities in the Republic of Bulgaria (NAMRB), Donka Mihaylovа. Speaking today to the Bulgarian News Agency (BTA), she explained that said plan could be implemented as soon as 2023.

The financial decentralisation of municipalities is claimed to be a priority of Bulgaria’s current coalition government. Furthermore, the idea has garnered a lot of support over the years, including from Bulgaria’s President Rumen Radev, though he has little executive authority. During an awards ceremony of the NAMRB last December, he explained that an increase in municipalities’ financial autonomy should be enshrined in the constitution.

A very significant impact on municipalities

Mayor Mihaylova also explained that a shift in tax collection could have a major impact on the way municipalities function. If the National Assembly accepts a proposed 2% transfer of income taxes from the national to local budgets, this could gather an estimated 490 million euros for municipalities.

Additionally, she said that there is a similar proposition regarding corporate taxes that would supply an additional 160 million euros.

In an earlier interview with the Bulgarian National Radio, Mihaylova explained that under the current model, whenever municipalities get additional financing from the national budget, they have very little say on how to use it.

She illustrated this by explaining that if a municipality gets funding for museums or roads, it must redirect it towards these types of projects, whereas its citizens may have a more dire need for better healthcare services. Furthermore, she argued that local administrations do not need more money per se, as long as they have a certain degree of autonomy when deciding how to use it.

The NAMRB expect that the new decentralised plan could become a reality during the next budgeting year in early 2023.