December 21, 2017 | by Stoyan Panchev and Georgi Vuldzhev Print

Stoyan Panchev is interviewed on Bloomberg TV Bulgaria. Photo: Bloomberg TV Bulgaria

On September 14, 2017, Bulgaria’s Finance Ministry tabled a proposal to lower the upper limit on cash payments to 5,000 Bulgarian levs (the equivalent of EUR 2,500 or USD 3,000) from 10,000 levs as part of an overall tax reform package related to VAT and some excise taxes. Cash restrictions of such scope would lead to significant changes for many Bulgarians, who still mostly rely on cash payments for many of their purchases, like second-hand car sales. The justification given for why such tightening of existing financial regulations was needed, however, was that it would reduce the size of the shadow economy and bring in more tax revenue.

In recent years the issue of regulations on cash payments has grown to be more and more important in all member-states of the European Union. There has been a widespread push towards stricter and stricter cash payment regulations across the entire EU, which has been stimulated and nudged forward by the European Commission. Some EU member states like Greece and France have already enforced very strict regulations on cash payments. In France, the limit on cash payments has been EUR 1,000 since 2015. It is even lower in Greece.

While cash payment restrictions have been passed with ease in these members states, such attempts have been met with widespread outrage in others, with the prime example being Germany, where the public quite vocally expressed its opposition. The issue has been growing in importance in the past several years to the point that it is now one of the most talked about financial regulations in the EU.

In Bulgaria, the same proposal that was tabled in September was already rejected in parliament just two months earlier, back in July, in large part thanks to the public campaign which the Bulgarian Libertarian Society (BLS) undertook against it. In effect, and without planning for it, this became the biggest policy issue for BLS over the summer and autumn months – and arguably the entire year of 2017. The reason is simple – financial freedom is paramount. Every citizen should have the freedom to pay for the goods and services that he purchases in any matter that he sees fit. Moreover, such regulations also hurt the business environment and have a pronounced negative economic impact.

Georgi Vuldzhev is interviewed on the 'War on Cash.'

The initial victory against more severe cash regulations

Our argument against more stringent restrictions on cash payments focused on three main points: 1) most reputable research shows that cash usage is not the main determining factor of the size of the shadow economy, 2) introducing more severe cash restrictions would hurt small and medium enterprises, and 3) cash restriction forces people to use more banking services, thus in effect providing a subsidy for the sector at the expense of citizens’ rights.

During the summer, BLS undertook a media campaign against the proposed legislation by writing op-eds for large news outlets in Bulgaria, publishing articles outlining arguments against the proposal and appearing on national television channels. BLS' op-eds on the subject were quite widely read and aroused considerable interest. A notable success in BLS' campaign against the new regulation was Stoyan’s appearance on the most popular national TV channel in the country, NOVA.

Soon, in large part due to BLS' efforts, the tightening of cash payment regulations became the hottest policy topic in the public eye. The public attitude quickly turned from apathy towards majority opposition against the proposal. Politicians in parliament took notice and seized on the opportunity to garner some popularity with the public by vocally opposing the regulation. Very soon the attitude in parliament followed that of the public and even the government's coalition partners opposed the proposal. Lacking a majority, the ruling party was not able to pass the proposal and it was officially rejected. 

The government strikes back

At that point we thought we had won. Unfortunately, the government turned out to be quite stubborn on this issue. As mentioned earlier, some two months after it was rejected in parliament, the Finance Ministry tabled the exact same proposal.

BLS' reaction this time was even faster. The same day that the news broke that the government was proposing this restriction again (Friday, September 14), BLS started organizing a flash mob. The flash mob against the proposed regulation was held on Tuesday, September 18, in front of the Finance Ministry and gathered dozens of people. While that was being organized over the weekend, Georgi, chief editor of our media website,, published an article outlining three major reasons why the new restriction on cash payment was not only unnecessary, but positively harmful to the Bulgarian economy and citizens. The flash mob garnered media attention and was followed by a number of appearances on national television and radio by members of BLS' executive board.

Georgi Vuldzhev is interviewed on BiTelevision (in Bulgarian).

This line of argumentation was very effective with the media and was successful in convincing the general public that cash restrictions are not only unnecessary, but a downright harmful regulation. People quickly started feeling that their own rights were being infringed for the purpose of satisfying lobbying interests from the banking sector. The rising opposition to the regulation was noticeable on social media, interviews with random citizens conducted by the media, and the comment sections on the large media websites.  

Ramping up our anti-regulatory efforts

Meanwhile, we did not limit our efforts to protests, media appearances, and articles. As an organization BLS also prepared two official statements on the proposed reform, which were sent to the government. The first statement outlined five major reasons why our economists believe that more stringent cash restrictions are unnecessary and harmful. We also criticized the Finance Ministry for not providing any evaluation of the effects that the application of the previous level of cash restrictions has had on the Bulgarian economy. Thus, we pointed out that the government is not only proposing a regulation which the vast majority of the relevant literature suggests will be unnecessary and harmful, but is also doing so without any data-based argumentation for its claim that it will reduce the size of the shadow economy.

After consultations with legal experts, we also prepared a second official statement, in which we criticized the government for not consulting the relevant EU institutions before proposing the amendment, as is the legal practice in the European Union. When EU member-states propose new cash restriction regulations they have to consult the European Central Bank (ECB), as per EU law. However, the Bulgarian government had not consulted the ECB before publishing its proposed amendment to the current regulatory regime on September 14. Because of this, we sent an official letter to the European Commission, signaling that the EU's procedures had not been followed in this instance.

At this point the topic was already mainstream, with both the media and the general public paying close attention, but the government remained set on adopting more severe cash regulations. The Finance Ministry's proposal passed the first review in the parliamentary Committee on Budgetary and Financial Matters and went to parliament for an initial review, where it was also accepted before being returned to the committee for a second and final review. 

Bulgarian Libertarian Society's vice president, Arkadi Sharkov, is interviewed at the 'War on Cash' flashmob.

The final battle and victory

We prepared to present out position against the proposed regulatory change at the second review in the parliamentary committee. Before that however, we reached out to the opposition parties in parliament to gauge their opinion on the matter. Maybe somewhat surprisingly, the Bulgarian Socialist Party was most receptive to calls to oppose the legislation, and they even featured some of our criticisms of the regulation on the website of their party newspaper. Consequently, all representatives of the socialist party who were members of the committee opposed the legislation at the second review.

At the committee meeting itself, we had the opportunity to personally talk to some of the members from the opposition parties and the junior partners in the ruling coalition before they took the final vote on the proposed legislation. Many were already skeptical about the regulation. The argument that it would hurt small businesses and the fact that public opinion felt as if it was restricting the rights of citizens in favor of the banking sector resonated with representatives of all political parties. With a little nudge from our side we were able to convince the majority of members of the committee to vote against the more restrictive regulation. Our efforts surrounding this legislation will likely prove useful in the long-term, as we were able to establish some connections with MPs which we previously did not have.

In the end, the Finance Ministry's proposal for the limit on cash payments to be lowered to 5,000 levs was rejected with a vote of 11 to 9 in the parliamentary committee. A week later the committee's decision was confirmed in parliament. The only party to vote in favor of the proposal was the ruling GERB (“Citizens for European Development of Bulgaria”) party. Even the junior partners in the ruling coalition voted against the proposal, citing concerns that the legislation favored the banking sector at the expense of regular citizens and small businesses.

This concluded BLS' fight against the government's attempts to pass stronger cash regulations, at least for this year. Considering the government's stubbornness over the issue, we are certain that there will be similar attempts in the future. Maybe not next year, but this will continue to be an area in which BLS must remain very active. The so-called "war on cash" is not only a Bulgarian, not even a European, but indeed a global phenomenon that needs the active work of civil society to combat effectively.

Stoyan Panchev portrait
Stoyan Panchev is founder and chairman of Bulgarian Libertarian Society, a graduate of Atlas Network’s Leadership Academy, and an alumnus of Atlas Network’s Smith Fellowship. Learn More about Stoyan Panchev >
Georgi Vuldzhev portrait
Georgi Vuldzhev is a member of the Bulgarian Libertarian Society’s executive board, chief editor of BLS’ media website, and a graduate of Atlas Network’s Leadership Academy. Learn More about Georgi Vuldzhev >