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THE MINISTRY OF FINANCE HAS PUBLISHED THE DATA ON MUNICIPALITIES’ FINANCIAL POSITION IN 2016 AS WELL AS ON THE MUNICIPALITIES IN A FINANCIAL RECOVERY PROCEDURE IN 2016

10.03.2017

The analysis of the data shows that municipalities have improved local revenue collection as well as that the financial indicators of a number of municipalities have also improved.  In 2016, the number of municipalities meeting the conditions for financial recovery decreased as compared to 2015. The structure of expenditures by economic elements is relatively the same but there are also trends of a better management of budget resources in 2016, compared to 2015, in a number of municipalities.  In 2016, the number of municipalities with a negative budget balance decreased to 60, or 22.6% of all municipalities on the territory of the country, against 156 in 2015 (or 58.8% of the municipalities).

2016 witnessed an improvement in the average rate of collection of the immovable property tax and the transport vehicle tax:

Period

Immovable property tax
average rate of collection  

Transport vehicle tax

average rate of collection   

Average level of the rate of collection under Article 130a, para. 1,
item 6 

2016

73.43%

69.58%

71.51%

2015

68.32%

63.40%

65.86%

 

Key factor for the improvement of this indicator are the mechanisms for revenue monitoring and control that have been put in place in the municipalities. The information exchange system (IES) in the Ministry of Finance has continued to develop with the aim of achieving automated provision of additional information by municipalities under Article 5a of the Local Taxes and Fees Law as well as upon any relevant changes in the law. A new service for natural and legal persons has also been prepared, enabling the electronic submission via the NRA's portal, using NRA's personal identification code and an e-signature, of the three most commonly used declarations under the Local Taxes and Fees Law - under Article 54, para. 4 and under Article 14. Since 2 February 2017, the service has been provided as a pilot one to natural and legal persons on the territory of Sofia Municipality, with the two declarations under Article 54, para. 4 of the Local Taxes and Fees Law being activated - for possessed passenger cars and for possessed transport vehicles, excluding passenger cars, and their respective corrective declarations. The service will gradually cover other municipalities, too. The declaration for the immovable property tax under Article 14 of the Local Taxes and Fees Law will also be added to the portal. Functioning is also an online system for information about local taxes and fees which, via the website of the revenue agency, provides information about businesses and citizens' liabilities to more than 200 municipalities in the country. The service has already been upgraded and allows for making online payments to 5 of the biggest municipalities in the country.

Based on the data for 2016, 32 are the municipalities that meet three or more of the criteria in order to be classified as municipalities in a financial recovery procedure in 2017, against 36 in 2016. These are the municipalities of Simitli, Strumyani, Sozopol, Sungurlare, Byala, Belogradchik, Bregovo, Vidin, Dimovo, Borovan, Krivodol, Mizia, Oryahovo, Kardzhali, Kocherinovo, Sapareva Banya, Teteven, Georgi Damyanovo, Belovo, Velingrad, Lesichovo, Septemvri, Pernik, Belene, Vetovo, Sliven, Banite, Devin, Nedelino, Chepelare, Mineralni Bani, Stambolovo.You can find the criteria that the municipalities meet under Article 130a, paragraph 1 HERE.

In 2017, 15 municipalities have been taken out of the list for financial recovery, for which it is assumed that the measures and recovery plans adopted by them have produced positive results and improvement in one or more of the indicators used as a basis to assess their financial position. These are the municipalities of Kresna, Lyaskovets, Kirkovo, Dupnitsa, Rila, Lovech, Batak, Karlovo, Dospat, Madan, Rudozem, Smolyan, Kostenets, Opan, Omurtag.

11 municipalities were included for the first time in the list for recovery in 2017: Sozopol, Sungurlare, Byala, Belogradchik, Bregovo, Krivodol, Oryahovo, Kocherinovo, Lesichovo, Belene and Vetovo.

The analysis of the recovery plans of the municipalities in a financial recovery procedure, submitted for approval to the Ministry of Finance, on the basis of data for both 2015 and 2016 is still ongoing. The estimates are updated and discussed in line with the municipalities' budgets for 2017 and the medium-term budget forecast for a three-year period adopted by the local councils. At this stage, the Ministry of Finance has granted interest-free loans to two municipalities: Pernik (BGN 4 million) and Belovo (BGN 2 million). The activities of the municipalities are controlled on monthly and quarterly basis with the aim to avoid any failure to fulfil the commitments taken, to achieve financial robustness and to ensure repayment of the loans taken from the central budget.

The Ministry of Finance is continuing its efforts to improve the effectiveness of municipal expenditures' management, together with the positive trend of improvement of the revenue side of the municipal budgets. It is advisable the municipalities to adopt and implement recovery plans not only in case of existence of three or more of the indicators under Article 130a of the Public Finance Law, but also in case of any indications of reaching the critical values under one or more of all monitored indicators. Thus, they would overcome and eliminate in due time the risk of violating the fiscal rules and parameters under the Public Finance Law, which are mandatory for municipalities in 2017, after the three-year transitional period necessary for their bringing in line with the requirements of the law.