Faced with the prospect of a worsening Budget deficit, Bulgaria’s Cabinet continued its search for solutions that would boost revenue, only to encounter renewed public opposition to measures that would increase the tax burden during the ongoing recession.

Already forced earlier in the month to backtrack on its decision obliging small-business owners to pay separate social security contributions for each activity they performed in their company, the Cabinet’s list of U-turns grew further in mid-March.

Only a week after it decided to increase mandatory health care contributions by two percentage points to 10 per cent, the Cabinet overturned the move on March 17. According to the laconic statement released by the Government media service, the change was "a result of the discussions and deeper analysis of all effects from the possible increase of the health care contribution".

The increase was meant to offset the transfer of 300 million leva to the National Health Insurance Fund (NHIF) earlier in the year, made necessary by the higher than budgeted costs of medical services.

The alternative to increased health care contributions was for civil servants to start paying their own share, instead of having the state cover all mandatory contributions for state administration, police officers, troops and members of the judicial system. In the private sector, the mandatory health care, social and unemployment contributions are split between the employer and employee.

As calculated by Dnevnik daily, that would result in a 12.1 per cent net cut in the Government’s payroll spending, this being the share of the gross salary taken by mandatory contributions.

At a gross average monthly salary of 733 leva in the public sector, according to the National Statistical Institute (NSI) figure for the fourth quarter of 2009, in absolute terms that meant an average pay cut of 90 leva. In the judiciary, where the average salary was 1900 leva, the pay cut would equal 230 leva, the newspaper said.

Police and military personnel labour unions were the first to announce protests against the plan. A police officers’ rally was announced for March 20 in Sofia, near Ivan Vazov national theatre.

Interior Minister Tsvetan Tsvetanov said he would join the rank-and-file at the rally, but pleaded for understanding.

"Today, this is what the state can afford and I will go to show solidarity with those demands, but you must understand that this can only be a gradual process," Tsvetanov said on March 17.

Measures to compensate for the effective pay cut were being sought for police officers, Dnevnik quoted the Finance Ministry as saying. It was not immediately clear whether such measures would be extended to cover civil servants or other state employees.

The issue was expected to feature prominently at the next meeting of the tripartite council of Government, employers and unions, scheduled for March 22. The Cabinet’s backtracking on March 17 happened against a background of a public outcry against what was supposedly a Finance Ministry 28-point proposal to boost Government revenue.

Among the controversial measures were taxes on pensions, decreased maternity leave pay and taxes on gross salaries, rather than after the deduction of the mandatory social and health care contributions. The document was reported to have been leaked by labour unions.

The Finance Ministry rejected on March 17 the claims that it was an internal draft proposal, saying that its task force was still analysing more than 100 potential measures. A proposal was expected to be drafted by March 19 and presented to Prime Minister Boiko Borissov and then to the tripartite council.

The ministry said that the publication of the pseudo-proposal was meant to instigate public opposition to the Government’s economic policies and undermine future co-operation in the tripartite council.

Already after the Finance Ministry statement, one of Bulgaria’s two main labour union blocs, Podkrepa, said that attempts by "certain representatives of the Government team" to increase the tax burden on employees would lead to "huge nationwide social tension that can turn into spontaneous and uncontrolled protest actions."