The current course of economic policy of the coalition led by Bulgarian socialist Sergei Stanishev was “two steps forward, one step back”, Austrian newspaper Die Presse said.

With the new income tax and the 10 per cent enterprise tax that has been in place since the beginning of the year, Bulgaria is among the EU countries with the lowest tax burden.

After institution of the economy-friendly tax policy, economic experts and critics of the Government have estimated that people earning more will profit from a 10 per cent flat tax, while those with earnings of less than 400 leva a month will bear a heavy burden.

Two-thirds of Bulgarians will be worse off with the flat tax. According to the National Statistical Institute (NSI), the average monthly income in Bulgaria is about 380 leva.

Currently, an income of 250 leva is taxed only 10 leva a month. After the tax reform, the same amount would be taxed 25 leva a month, Die Presse said.

Not only those with low incomes, but also those who work independently as counsellors, engineers and journalists will suffer from the loss of tax exemptions that have been in place up until this point.

Due to the steady development of the budget, the Government expects to be in the position to lower social security fees by three per cent and raise pensions by 11 per cent in October 2007. For this year, a surplus of 2.5 billion leva is expected.

A commission managed by Finance Minister Plamen Oresharski will devise measures to compensate groups disadvantaged by the flat tax.