SOFIA – Bulgaria will introduce a flat income tax of 10 percent next year – one of the lowest in the European Union, parliament decided yesterday. The chamber approved changes in taxation for 2008, under which the flat rate will abolish the current four-bracket tax system in an attempt to boost low living standards. Bulgaria introduced a corporate tax of 10 percent this year to boost economic growth and reduce significantly the gray economy. The deputies voted to scrap the non-taxable income threshold, currently set at 200 levs ($146.6), despite trade unions protests. Labor activists had argued that its lifting would hit the poorest and further cut their low incomes. The Socialist-led cabinet has pledged to compensate workers in the public sector whose net incomes will decrease as a result of the flat tax. The new European Union member hopes the low direct taxes will boost collection and would allow for up to a 10 percent hike in public salaries next year, as well for a budget surplus of 3 percent of GDP. Sofia plans to keep a tight hold on the fiscal reins to dampen domestic demand and avoid jeopardizing its already overheating economy, where inflation surged to 12.6 percent in November.