Having sparked several waves of public discontent and generated more than a week’s worth of meetings of the tripartite council of Government, employers and labour unions, the Cabinet adopted on March 31 the list of 59 measures intended to boost Budget revenues and cut spending in order to avoid a deficit this year.

The final document, signed by the council just hours before the scheduled Cabinet meeting, abandoned a proposal to increase value-added tax (VAT) by two percentage points to 22 per cent, criticised by economists and employers as procyclical and likely to further deepen the economic recession.

Finance Minister Simeon Dyankov projected on March 23 that if the state Budget was left unchanged, the deficit at the end of the year would be 1.5 billion leva above the Government’s target.

The VAT increase would have covered about a third of that amount, according to the ministry’s calculations, as reported by Bulgarian media, but critics said that the ministry was grossly overestimating the impact of the measure.

Instead, the Budget’s biggest money-earner from the list would be the fire sale of "assigned amount units", the emission credits allocated to a country under the Kyoto Protocol. The Cabinet expects to raise 500 million leva from the implementation of this measure alone.

Another major source of revenue would be the sale of minority stakes held by the Bulgarian state in privatised companies. The proposal envisioned that the shares would be sold on the Bulgarian Stock Exchange, which saw trading turnovers dwindle over the past 18 months because of investor outflow.

However, the list did not specify shares in which companies would be sold, but the country’s three power distribution utilities – owned by Czech CEZ, Austria’s EVN and Germany’s E.ON – have been reported to be likely candidates.

This would net the Budget 250 million leva, according to the Finance Ministry. A further 164 million leva was sought through changing the terms of land lease contracts to extend the lease periods. The state would offer 90 000ha on lease for an extended period of time, provided that the lease is paid in advance. About 10 000ha of land would be put on auction.

The much-publicised luxury tax would only yield 35 million leva in additional revenue, which would come from doubling the tax rate on properties with a tax assessment of more than 300 000 leva and cars with an insurance assessment of more than 70 000 leva, as well as a three-fold increase of the tax rate on private yachts and jets.

The biggest source of savings would be a 10 per cent reduction in spending by all state institutions, with several notable exceptions, which included the customs, revenue, employment and forestry agencies, as well as the Chief Labour Inspectorate, regional health control and environmental oversight directorates.

The measure would not affect institutions that have already cut their spending in line with an earlier Government decree, but overall would save 450 million leva. The other major cost-cutting measure would defer an increase in pensions to people aged 75 and above, which would save 142 million leva. The money, however, would not go into the state Budget, but would remain with the Labour and Social Policy Ministry as an "additional subsidy to the Labour Ministry’s budget for social assistance measures".

The final list was broken down into seven categories: fiscal revenue-boosting measures, which would net a total 1.15 billion leva; cost-cutting measures, which would save 340.5 million leva; measures to strengthen fiscal discipline, with a net spending increase of 250 000 leva to hire more personnel at the Public Financial Inspection Agency; measures to secure refinancing opportunities for the real economy, with a projected eight million leva increase in spending from easing visa restrictions on citizens of Russia and Ukraine; measures to shore up household incomes, which would lead to 55.5 million in extra spending; measures to improve the labour market, with a net outlay of 24 million leva; and social assistance measures, with projected savings of 137 million leva.

Overall, however, only 22 measures in the 59-point plan made public by the Cabinet had a financial projection attached, since the rest of the measures were not specifically targeting increased revenue.

Among such measures were commitments that the Cabinet would submit, by the end of May, its proposals on pension and health care reforms to the tripartite coalition. The Cabinet also agreed to "refund VAT to corporate entities within the legal time frame", but the proposal contained no exact deadline on refunding the VAT now owed to the private sector. Another measure was the "rejection of increased mandatory health care contributions."

The Cabinet’s final resolution, however, had 60 points, including a measure that mandated that in case of sick leave, employers would cover the salary for the first two days, with the third day unpaid, after which the expenses would be covered by the National Social Security Institute (NSSI). Now, the first day of sick leave is paid by the employer, after which all salaries are covered by NSSI.

The measure failed to win unanimous support in the tripartite council, but Dyankov said that the ministry hoped that it "would put an end to abuses with sick leave spending".
Prime Minister Boiko Borissov said before the Cabinet meeting on March 31 that the Government would authorise the payment, within 15 days, of 550 million leva owed to the private sector, but was adamant that unless the Cabinet could cancel some of the contracts signed by its predecessors, there would be no choice but to raise the VAT rate.

Sofia city prosecutors launched an investigation into the flurry of contracts signed by 13 ministries during the last months in government of the socialist-led tripartite coalition in 2009, worth 2.16 billion leva, according to Borissov.

"With the inheritance from the tripartite coalition there is no way to increase pensions. We want to do so and will do so during our term. Right now, however, the calculations show that we cannot pay for it," Borissov said. Socialist leader and former prime minister Sergei Stanishev rejected the claims of wrong-doing, saying that the figure was inflated and that most contracts were multi-year affairs.