The government announced on Monday that it was going to increase taxes in a bid to keep some of its pre-election promises in the face of a global economic crisis.

"Raising indirect taxes and introducing new duties should boost the Bulgarian economy in spite of the looming world financial crisis caused by the September 11 terror attacks on the United States," Finance Minister Milen Velchev told a press conference.

"We have decided to increase indirect taxation, because direct taxes influence economic decisions," explained Velchev. "It is true that part of the taxes are going up, but we are aiming them at the most affluent part of the population," he said.

The new taxes include 20 per cent VAT on tourist packages sold abroad, medicines and legal services, excise duties on coffee, beer and tobacco, road taxes, and a tax on off-shore bank transfers designed to stem money laundering.

"This packet of fiscal measures will realize a large number of the promises of the prime minister, Simeon Saxe-Coburg," said Velchev.

Back in August, Saxe-Coburg announced radical measures to boost Bulgaria's economy including tax exemptions for incomes below a certain level and for businesses that reinvest their profits, as well as a lowering of the personal income tax rate. Two months later, the government had to rethink a number of those plans, including tax exemption for businesses which reinvest their profits, under pressure from the International Monetary Fund (IMF), which recommended more prudent fiscal policies.

The government has, however, been able to realize some of its promises, including tax exemption for those with incomes of less than 110 leva and reducing the tax scale for personal income from between 20 and 38 per cent to between 18 and 29 per cent from 2002.

Plans to double family allowances next year have been reduced to an increase of 23 per cent in the new announcement, but a rise in salaries, and pensions of 8.9 to 9.9 per cent is also planned for 2002, realizing one of Saxe-Coburg's main election pledges.

The minimum monthly salary will be increased to 100 leva, as pledged, while the average pension is projected to be 100.6 leva. The scheme for child allowances will be amended to ensure that it is targeted only to those who need support. The government recently adopted a 100 per cent increase in child allowance, paid regardless of household income, which was opposed by the IMF.