representative food basket in Bulgaria<sup>12</sup> , as a relative poverty line is used for official poverty measurement in the EU<sup>13</sup> , we use the Bulgarian food basket recently estimated by the EC within the European Reference Budget network **.** This food basket outlines the monthly budget for adequate food intake for three reference households (children and working-age individuals in good health, without disabilities, and residing in Sofia). The basket covers expenses for food and kitchen equipment essential for preparing, serving, consuming, and preserving the food. Additionally, it considers the budget required for physical activity and other aspects of food, such as its social function—the estimation of the Bulgarian basket under the European Reference Budget network<sup>14</sup> in 2015. The administrative data is used to model the program beneficiaries in the surveys. Frequently, the survey figures related to population variables, income, consumption, fiscal interventions, etc., do not align with the totals derived from administrative accounts.

# Commitment to Equity Model (CEQ) and Modeling of Social Transfers

**This study uses the CEQ model and infrastructure developed by Robayo and Cabrera (2024).** The fiscal incidence approach aims to help through a comprehensive tax/benefit system assessment using a diagnostic tool called the Commitment to Equity Assessment (CEQ). The CEQ approach is among the first efforts to comprehensively assess the tax/benefit system in developing countries (including indirect subsidies and taxes and in-kind benefits in the form of free education and health care) and to make the assessment comparable across countries and over time.

**The analysis uses a national poverty measure, specifically the "at-risk of poverty" indicator, as its primary metric and investigates how policy reforms can influence this measure** . In the European Union context, this evaluation generally involves a comparative analysis of the "at-risk-of-poverty" rates with and without the proposed policy reforms. Both poverty rates are determined using the same poverty threshold, set at 60 percent of the national median adult equivalent disposable income as of 2020. It's important to note that the estimates presented in this report are based on the data from CEQ Bulgaria (Robayo-Abril & Cabrera, 2023). The findings from this updated analysis reveal that, despite the policy reforms considered, the impact of fiscal measures on poverty and income inequality remains relatively limited.

**There are several advantages of using the CEQ and not individual microsimulation of the MSA reform scheme** . The CEQ approach considers the whole fiscal system, taking into account not only social transfers

12 The Bulgaria NSI publishes the Price Index of a Small Basket (PISB), which comprises about 100 goods and services considered socially useful and vital for living. The aim is to gather representative country data on prices paid by households for these items and calculate indices reflecting their changes over time. The PISBs focus on goods and services essential for the biological and social existence of individuals or households with relatively low incomes, using expenditure data from the lowest income 20% of households. The methodology aligns with the calculation procedure for the Consumer Price Index (CPI). However, this Index of consumer basket measures only the change of prices and, therefore, is defined as a "pure price change" index. They do not measure the cost of living and are not the cost of living indices.

> 13 In countries where official poverty is measured using consumption, national extreme poverty lines are anchored to the cost of a food basket.

> 14 Reference budgets have been developed across the EU by _the Herman Deleeck Centre for Social Policy, University of Antwerp, and DG Employment, Social Affairs and Inclusion,_ with the purpose of assessing income support – in particular minimum income schemes – in the EU.

> <u>https://ec.europa.eu/social/main.jsp?catId=1092&intPageId=2312&langId=en</u>

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