Enterprise and Fiscal Reform in Bulgaria

The collapse of the former socialist economies in Eastern Europe and the abandonment of state planning in favour of the market through privatization of former state assets poses fiscal dilemmas for the governments concerned, as is illustrated by the case of Bulgaria. The loss of the traditional profits-tax revenue while social security pressures on the budget remain in place presents an acute budget problem. The introduction of new taxation systems, and the administrative mechanisms to enforce them, is an urgent requirement; even then eliminating the fiscal gap requires substantial growth. Enterprise and financial reforms should therefore not be delayed, despite their initial adverse impact on the budget.