There has been an 8 to 10 percent annual increase in the average salary over the past few years and this is an indication that we are slowly catching up with average European levels, seeing as the starting point for the Bulgarian economy was very low. Still, the process of catching up is there to be seen, said in an interview for the Bulgarian National Radio Yavor Alexiev form the Institute for Market Economics.

“Whereas no more than 15 years ago the average worker in Bulgaria was 6-7 times poorer than the average worker in Germany, now the difference is down to just over 3 times. The element of catching up is a fact. The problem now is to pursue the right policies - or not to pursue policies that are wrong - so this process may continue and spread to a larger portion of Bulgarian citizens. At this time, no more than 30 percent receive what we call an average salary or more,” Yavor Alexiev said.

In his words, the poorest 10 percent of the population are people with no connection to the labour market. Only 30 percent of their incomes are actually generated by salaries, the rest is from pensions and welfare. By upping the minimum salary, the people who receive a minimum salary will get more money, though that will not affect the poorest 10 percent of the population who are at risk of social exclusion most.

As to reducing VAT, that could be done by cutting down on some expenditures, while some taxes could be reduced as far as the budget would allow.

“The flat tax is one of the few things that works and even at the time of the crisis the revenues coming in from it did not decline but remained stable,” Yavor Alexiev adds.

What does flat tax mean? The flat tax system is a system that applies the same tax rate to every person or company regardless of income bracket. The rate is the same for the poor and for the rich.

In Bulgaria the idea of a flat tax gained popularity at the beginning of 2003 when around 100 economists sent an open letter to Finance Minister Milen Velchev, demanding the introduction of a flat 10 percent income tax. The flat tax was introduced on 1 January, 2008.

English version: Milena Daynova