On one and the same day Bulgarian Socialist Party (BSP) and it partners sent out contradicting signals about tax politics for 2008, Dnevnik daily said on November 15.

BSP launched the idea to keep family income tax deductions and to freeze the changes in the ratios between the shares of employer and employee for insurance taxes. National Movement for Stability and Progress (NMSP) rejected to freeze the ratios and instead presented its variation for local taxes. Third party in the coalition, Movement for Rights and Freedoms (MRF) was also surprised by the BSP proposal and countered with a demand in changes in the taxes on cigarettes.

All this took place two weeks after the budget 2008 had been entered in Parliament and at the beginning of the discussion of the tax changes in the National Assembly, on which the three parties reached a principle agreement in July 2007.

Chairman of the budget commission Roumen Ovcharov said that the disappearance of the family income tax deduction for 2008 would have to be specified.

The budget proposal entered into Parliament stipulates that all tax deductions disappear because of the introduction of a 10 per cent flat rate income tax. Cabinet argued that families would be compensated by the increase in child support, which in 2008 should become 30 leva. At the same time the maximum threshold for receiving support was maintained at 200 leva per person in the family, which would limit the use of the compensation. According to statistics, around 300 - 340 000 people made use of the family income tax deductions every year. Tax reductions on average were between 70 and140 leva per family.

"I don't see why the deductions can not be maintained. It would cost the budget less than to increase child support," Ovcharov said.