Bulgaria's Demographic Decline and Flat Tax Policy Contribute to Income Inequality

Bulgaria has been identified as the EU country with the highest income inequality, a situation exacerbated by the implementation of a flat income tax system. According to the World Bank's new Partnership Framework with Bulgaria for 2025-2029, inefficient use of state budget funds, coupled with the budget's small size relative to the country's gross domestic product (GDP), has resulted in inadequate financing for essential public systems, thereby compromising the quality of public services.

The demographic trends in Bulgaria are further deepening the urban-rural divide. The analysis highlights a significant population decline due to emigration, driven by stark income disparities between Bulgaria and other EU nations, poor infrastructure, and limited access to public services, particularly in rural and mountainous regions. Between 2001 and 2022, only two districts experienced population growth, while seven districts saw declines exceeding 25%.

Bulgaria's budget share relative to GDP warrants reconsideration, especially as rural depopulation has led to an increase in the number of small municipalities. This trend poses a threat to the delivery of public services in those areas. The World Bank notes that regional disparities are particularly pronounced in healthcare access, with a notable shortage of doctors. Over 60% of general practitioners are aged 55 or older and nearing retirement, which will exacerbate the issue.