To carry out this comprehensive fiscal incidence analysis, the following data was used:

- _Household-level data_ : This includes the 2021 Survey on Income and Living Conditions (SILC) for the income year 2020 and the 2021 Household Budget Survey (HBS)<sup>14</sup> . These datasets provide information at the individual and household level, allowing for a granular examination of the tax/benefit system's impact on different households.

- _Administrative data_ : Information on the number of beneficiaries per program and the number of taxpayers is essential. This data helps in understanding the specifics of the social protection system. The EUROMOD Bulgaria country report for the years 2018–2021 and the European System of Integrated Social Protection Statistics (ESSPROS) serve as sources for this data.

- _Data on the tax system_ : Data regarding the tax system is sourced from the Ministry of Finance (MOF) of Bulgaria and the EUROMOD. This data provides insights into the structure and characteristics of the tax system, including revenue collection mechanisms.

- _Fiscal data:_ Data from various sources such as the International Monetary Fund (IMF), Organization for Economic Co-operation and Development (OECD), and Eurostat is utilized. The IMF's GFS Main Aggregates, GFS Revenue datasets, and the OECD's Tax Revenue Statistics contribute to the fiscal data. Eurostat, a statistical office of the European Union, also provides relevant data for analysis.

**A comprehensive evaluation of Bulgaria's tax/benefit system can be conducted by combining the datasets above and employing micro-simulation analysis techniques.** This analysis enables a comparison of the system's performance before and during the COVID-19 pandemic, specifically for the years 2018 and 2020.

**The model encompasses a wide range of taxes and government expenditure items - comparable to other countries- capturing a comprehensive view of the fiscal system.** This analysis covers 60% of the total expenditure and 69% of the total revenues for Bulgaria in 2020. It uses a CEQ scenario where pensions are treated as a deferred income rather than a direct government transfer (See Lustig, 2023).<sup>15</sup> This analysis includes the following fiscal interventions: direct taxes (personal income tax), contributions to social security, social protection transfers, subsidies, indirect taxes, and in-kind transfers (health and education). The analysis used the 2021 EU-SILC for the main income components and the 2021 HBS, which provides expenditure details of the goods subject to indirect taxes and consumption.

# **This analysis encompasses implicit subsidies associated with electricity and gas consumption, as in**

**Vaughan and Cabrera 2022.** First, we estimate the electricity and gas expenditure per household from the 2021 Household Budget Survey (HBS). Then, the current residential tariff structure, including all associated taxes, is employed to underpin household kilowatt-hour consumption. Subsequently, to quantify the direct impacts of the electricity subsidy, the subsidy is estimated as the product of the consumed kilowatt-hours multiplied by the difference between the price and the production cost per unit. The estimates of the production cost stem from the International Monetary Fund's (IMF) Fuel Subsidies

> 14 The 2021 Survey on Income and Living Conditions (SILC) used 2020 as the reference year. However, the 2020 Household Budget Survey was not available from the National Statistics Office. Therefore, the 2021 Household Budget Survey was used to approximate spending in 2020.

> 15 In the CEQs, there are two contrasting scenarios: 1. Pensions as Deferred Income (PDI) - This is the baseline scenario, where pensions are considered part of pre-fiscal income, and contributions are seen as individual savings; and 2) Pensions as Government Transfer (PGT) - In this scenario, pensions are treated as direct transfers, and contributions are treated as direct taxes.

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