Банкеръ Weekly



BULGARIA CANNOT ENTER THE EU WITHOUT CLOSING DOWN THE DUTY-FREE SHOPSBulgaria has no chances to close down the Customs Union chapter in the negotiations with the European Commission (EC) during the Spanish Chairmanship, it became clear during the week. The news were broken by Bulgaria's Chief Negotiator with the European Union (EU) Meglena Kuneva, who was in Brussels together with the Foreign Minister Solomon Passy. However, Ms. Kuneva's straightforwardness remained in the shade on the background of the successful finalization of negotiations on the chapters Economic and Monetary Union, Social Policy and Employment, and Institutions. According to Ms. Kuneva, the delay of negotiations on the customs is due to purely technical reasons.The postponement of the ticklish question regarding the customs increases the doubts in the dialogue with the EU in this sphere. Brussels is presently sparing of comments. At that, Bulgaria received EUR4.2MN only instead of the demanded EUR11MN for projects on the customs under the EU PHARE Programme for 2002.Well-informed sources told the BANKER weekly that the EC had set a requirement to the Bulgarian Government to prove that it will have full control over the check-points which are EU's external borders. The reason for that was allegedly the agreement with Crown Agents, under which the British consultants would have access to the border control zones. The Government's strategy for speeding up negotiations with the EU in its part regarding customs projected that by February 20, 2002 an exact plan for completing the information system BIMIS would be filed in Brussels. Most probably, however, they will have to explain how the installation of various modules of Crown Agents' software products would influence the pace of introducing the Bulgarian system. According to pundits, the problem was that under the contract with Crown Agents the software would remain their property. This practically means that in three years when the term of the contract expires, the British consultants will leave the country together with their software. But Brussel insists that Bulgaria should have an operating computer system at least a year prior the country's accession to the EU.But the contract with Crown Agents is not the only and most serious stumbling stone in front of the customs' cart.One of the most important issues to be clarified is the term within which duty free shops at Bulgaria's borders would be closed down. The 15 EU member countries did that on July 1, 1999.In Bulgaria, however, things are usually different and any decision of the kind turns out to be last but one. The Custons Act, passed in 1998, stipulated that Bulgarian free shops should be shut down after their contracts with the Customs Agency expired, or in the beginning of 2002. Most of the 10-year contracts were signed in 1991. According to inofficial informationthe companies licensed to carry out duty-free tradeare about 20, but more than 30 shops are presently operating. Among the small number of licensed companies are Transimpex, Bella Tour, Aida Tour, Corecom, Sofcom, B.N.K., etc.By the Amendements to the Excise Duty Act, passed in December 2001, these companeis were allowed to continue duty-free trade within ten months after their contracts with the Customs Agency expire. In that period the shops have to remit each month 2% of their turnover to an account of the Customs Agency. According to data of the Customs Agency, the duty free shops have remitted DEM1.5MN and USD5.7MN to the budget over the last ten years. It is said that serious economic interests are behind the decision to give a breath of fresh air to duty free shopsSuch a thesis may not be lacking logic, having in mind who's who among the owners of some of the licensed companies. In December 2001 the Privatisation Agency sold 78% of the capital of Transimpex to a consortium between Duty Free EOOD and Galenit Invest OOD against BGN11,900,000. Intko Trade OOD, represented by the well-known trader Zaki Madjid, is the sole owner of Duty Free EOOD. Galenit Invest is owned by First Investment International S.A., but according to pundits is controlled by the gambling boss Vassil Bozhkov.The name of Vesselin Balevsky, the owner of B.N.K., made a stir due to the political protection on the part of ministers from the government of the United Democratic Forces coalition. The company of the former soccer player of Sofia's football club Levksy was accused some time ago that it was illegally granted a licence for duty free shops in Kalotina. Mr. Balevksy's wife was Ivan Kostov's secretary when he was finance minister and also Mouravey Radev's when he was a finance minister, in Mr. Kostov's cabinet. Finance Ministry sources claim that she still works there in the International Relations department.The economic advantage from prolonging the life of duty free shops is quite arguable. According to financiers, it is not logical for taxpayers to subsidize a certain number of holiday-makers and traders. It is a public secret that the preference for duty free shops are used for smuggling of alchoholic drinks, cigarettes, and coffee. People in the know claim that the free shops are used for illegal trade according to two schemesThe more guileless one is said to be the retail trade of goods, purchased duty free, in small shops of the border towns. There is nothing complicated in this scheme. Traders enter the border zone by buses, driving along the road for vehicles leaving the country, load cheap drinks and cigarettes, and return without passing the border. Their most frequent explanation is that they have had problems with the documents. Customs officers are also in the game. The scheme is closed by the sale of the purchased goods - most often to companies owned by relatives or friends of the customs officers.Much more serious losses to the treasury have been inflicted by the large-scale import of excisable goods that has been going on for yearsExcisable goods are officially imported for trade in the duty free shops but are sold on the domestic market at lower prices. According to experts, each five of eight imported containers with cigarettes are declared as duty free import and three of these five containers are sold on the domestic market without customs duties, excise duties, of VAT having been paid on them. The ruling majority from the National Movement Simeon II counts that this practice would be to a large extent limited by introducingspecial labelsfor trade in duty free shops. Amendments to the Tax Procedures Code, approved by Parliament this week, stipulate changes in the Excise Duty Act. FOR DUTY FREE ONLY labels shall be stuck to the goods in the free shops. This should prevent their selling on the domestic market.But the chaos preceding their introduction hints that the problems are hardly likely to be solved by a magic wand.

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