Bulgaria PM Boyko Borisov has confirmed that his center-right GERB government will not increase Value Added Tax (V.A.T) from the current 20%.

After a number of u-turns which saw the government suggesting V.A.T rises of between 2-4%, Borisov stated Wednesday that “VAT will not be raised,” after a meeting of the cabinet.

He added that an updated 2010 budget will provide additional funding for health care, tobacco growers, transport and general infrastructure projects and that no taxes will be raised in 2010.

Finance Minister Simeon Djankov continued that “our goal is to make Bulgaria the best place for doing honest business in Europe.”

Djankov said that the government had chosen the more difficult path of reform and savings, instead of raising value added tax. The selected plan includes "an abrupt introduction of structural reforms in health, education, pensions and administration, additional cost cuts of 20%," he added.

PM Borisov informed that the cost saving measures would add an extra BGN 900 M to treasury by the end of 2010, with an extra BGN 500 M expected to be gained from tobacco, alcohol and iron taxes and crack downs on illegal sales.

BGN 116 M of extra funding will be provided for tobacco growers and BGN 220 M will be unblocked from the reserve of the National Health Insurance Fund for the health sector according to the government's proposal.

Borisov concluded that the situation in the region must be kept a close eye on by the GERB government regarding the economic problems in Greece and Romania; “when the bear plays in the neighbors it is likely he will come and play in our garden too.”

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