22.06.2015

"The fight with the informal economy cannot be a one-off act or a phenomenon, it has to be a process and a purposeful imposition of perceptions in all economic entities that the state is not going to tolerate such behaviour", Minister of Finance Vladislav Goranov stated during the round-table discussion on For Business to the Rules, organised by the Association of Industrial Capital in Bulgaria (BICA) and National Centre "Business to the Rules".

The Finance Minister announced that after the measures taken by the Ministry of Finance (MoF) for amendments to the legal framework in connection with the collection of public revenues and lowering the pressure of the informal economy on the budget the revenues collected under the central budget as of 18 June were in nominal terms by around 10.8% more compared to the same period of last year. For this period the revenues collected by the two revenue administrations are by BGN 1,109 billion (11.1%) more than for the same period of last year. Vladislav Goranov said that thanks to the measures to criminalise the non-payment of social security and health insurance contributions, the increase of revenues therefrom was 12.2%, BGN 319.9 million more had been collected compared to the same period of the previous year, the highest being the increase of revenues from health insurance contributions - by 13.5% more. "In the first five months of the year we report an improvement of the budget position by over BGN 2 billion or 2.5% of GDP. The trend is maintained which gives us grounds to believe that the direction we have taken is right", Minister Goranov added.

Vladislav Goranov reminded the new measures that MoF was taking to combat the informal economy and building up of new ideas on already existing ones. These being strengthening the control over the supplies and movements of liquid fuels via the automated system for exchange of information between the NRA and the Customs Agency; the amendments to the Value Added Tax Law from the end of 2014 under which all entities who supply vehicles, machines, facilities or other equipment with liquid fuels to meet their own needs shall register and report the fuelling under Ordinance H-18; strengthened control on site by the NRA and the Customs Agency over the production of excise goods until all taxable persons meet the requirements for automatic reporting to the revenue administrations. As a result Minister Goranov announced that for the first five months of the year the NRA and the Customs Agency authorities had detained 70,000 l of spirits, 11.8 million pieces of contraband cigarettes, 3 t of cut tobacco and 85,000 l of fuels that had been outside the regime regulated by the legislation.

Among the other measures taken by the MoF are strengthened control over the sales in outlets; the introduced reverse charge of VAT mechanism in respect of supplies of cereal crops. The Finance Minister pointed out that the effect of that measure only for 2014 was estimated to be BGN 207 million and it would continue in 2015 too. Minister Goranov reminded that at the beginning of May our country joined the request of Austria and the Czech Republic addressed to the European Commission for the introduction of reverse charge mechanism for all taxable supplies exceeding EUR 10,000, thus expecting to lower the VAT losses across the EU that are estimated to be around EUR 140 billion per year. One of the measures to lower the effects of the informal economy is the activities of the NRA in respect of the movements of goods with high fiscal risk and the work of the fiscal control unit. Minister Goranov reminded that 4 fiscal control points had been opened at our border with Turkey and Serbia and at the two Black Sea ports Varna and Burgas.

As regards the work of the customs at the cross border control points according to Vladislav Goranov "the battle there is day and night". Work is being done on strengthening the automated control and eliminating the human factor as a prerequisite for corruption practices. "Since 1 July you cannot pay anything in cash at Kapitan Andreevo. With the installation of the weigh bridges for automated control the proceeds from road charges have increased 17 times for two weeks", the Finance Minister informed. He announced that an information system was being developed at the MoF which would be "a supervisor" of the information systems of the NRA and the Customs Agency; thus the physical movement of all goods on the territory of Bulgaria in an import regime or in transit regime will be monitored so as to eliminate all possibilities for avoidance of VAT payment. At the end of his statement Minister Goranov reiterated his belief that "policy is made through the expenditure side of the budget and not through the revenue side".

At the briefing for journalist that followed, to a question about the hot topic of Greece discussed at the ECOFIN meeting at the end of last week the Finance Minister said that "We, at the MoF, monitor carefully what is happening in our Southern neighbour - first and foremost the tension in respect of their banking system. We have no reason to look for a direct link between the problems there and eventual problems in Bulgaria. For me the monitoring of the Greek topic is rather a monitoring on how imprudent policies pursued for a long period of time can force a wonderful country with unique nature to its knees".