Just days after promising trade unions to calculate the financial effect of a potential two per cent increase in social security contributions from 2011, Bulgarian Prime Minister Boyko Borissov pledged before employers to leave them intact until the end of 2012.

The announcement was made by all employer groups’ representatives on July 28 2010 after meeting with Borissov, Labour Minister Totyu Mladenov and Krasimir Stefanov, executive director of the National Revenue Agency (NRA).

The commitment made by Borissov is in line with the medium-term budget projection by the Ministry of Finance. Employers at the meeting backed a package of measures proposed by NRA to prop up the social security budget by more efficient collection of contributions and curbing the shadow sector.

At a later meeting between the business community and unions arbitrated by Mladenov, the two sides failed to reach a compromise on pension sector reform and the steps that need to be made to strengthen the system. Unions still insist on a rise in pension contributions from 2011. They also oppose the proposed increase by three years of the years of service needed to get state pension from July 1 2011.

"The pension reform can no longer be postponed," Mladenov said after the meeting. "The situation at the National Social Security Institute (NSSI) is extremely dramatic. Due to the lower revenue, the unplanned deficit will balloon to BGN 206 million by the end of the year," he said.

The Government has revived two old measures to try and curb the grey sector. These include a 5000 leva cap on cash payments and forcing employers to pay all salaries by bank transfer. Another proposal will see tax authorities calculating social security contributions equal to the sector’s average social security income in certain occasion. This measure was welcomed by employers, who said it would reduce unfair competition by the grey sector.

"It’s not fair that cooks in a five-star hotel should be making 600 leva and 3600 leva at another five-star hotel," said Bozhidar Danev, chairman of the Bulgarian Industrial Association.

Source: Dnevnik.bg