consequences of child poverty, there is a need to implement policies that focus on increasing parental work and income, along with increasing the efficiency of social protection spending on families and children, while maintaining the level of spending. The regression results for the whole EU also show that non-means tested benefits could have a more significant impact on child poverty than means-tested benefits<sup>6</sup> . Additionally, public investments in education, childcare, health, and housing are essential to mitigate the lasting effects of child poverty. There is no comprehensive evidence to date for Bulgaria on the combined incidence and impacts of taxes and public spending focusing on households with children and child poverty.

**In this context, Bulgaria needs to implement sound and equitable fiscal policies and ensure their effectiveness in promoting growth, expanding opportunities, reducing inequality, and accelerating poverty reduction, including among children** . This requires a comprehensive approach to fiscal reforms that not only focus on economic growth but also address poverty and inequality at both the overall and specific group levels, particularly households with children.

**To gain a deeper understanding of the distributional effects of individual programs and policy measures, as well as the overall impact of Bulgaria's fiscal policies, the World Bank conducted the first comprehensive fiscal incidence analysis (CEQ) in 2018; this paper provides an update of this analysis to provide a dynamic picture of the impact of fiscal policies on poverty and inequality, considering the effects of the COVID-19 pandemic and introduces some methodological improvements on the social transfer side.** The analysis uses the Commitment to Equity (CEQ) framework to examine how the fiscal system, as a whole and in its components, affects poverty and inequality in Bulgaria. The CEQ approach allows for assessing the net effects of various policies and programs in the country's fiscal framework. Building on the existing  CEQ 2018 (Vaughan & Cabrera, 2022), the World Bank updates the analysis using the latest available data on the COVID-19 pandemic, including the 2021 Survey on Income and Living Conditions (SILC) and the 2021 Household Budget Survey (HBS)<sup>7</sup> . This analysis not only updates previous work using the CEQ framework but also expands the analysis of social protection transfer. We evaluated changes over time by comparing the pre-COVID CEQ results with the updated CEQ, providing insights into how fiscal policies have evolved and adapted to the challenges posed by the pandemic. This comparative analysis offers valuable information on the effectiveness of fiscal measures in addressing poverty and inequality during the COVID-19 crisis. In addition, the standardized CEQ framework allows Bulgaria's fiscal system to be benchmarked against other countries. By refining and updating previous work, this analysis takes advantage of the most up-to-date household survey data, administrative data, and macro data on fiscal accounts, and improved modeling techniques on the social transfer side, allowing a more comprehensive and updated evaluation of social protection transfers.

**In addition to updating the CEQ, we expanded the analysis by incorporating an assessment of the impacts of fiscal policy on child poverty and using microsimulation techniques to simulate the potential**

> 6 The analysis cited only considered the statistical association of child poverty reduction of cash mean-tested, cash non-meanstested, in-kind mean-tested, and in-kind non-means-tested benefits. Coefficients are more significant for non-means-tested cash and in-kind benefits compared to means-tested, all of them being positive. It does not consider when the benefits are recaptured via income tax payments. This effect could be relevant depending on the cash benefits if they are part of taxable revenue for income tax purposes.

> 7 The 2021 Survey on Income and Living Conditions (SILC) captures income in the year 2020. Unfortunately, the 2020 HBS is not available, so we use the 2021 HBS to approximate consumption in 2020.

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