Банкеръ Weekly

Briefs

FUTURE OF DUTY-FREE SHOPS UNCLEAR

The future of duty-free shops along Bulgaria's Serbian and Turkish borders remains unclear. Parliament is already debating whether or not duty-free shops should be closed for ever. If this appears to be the final decision, it will be officially registered in the Duty-Free Trade Act between the first and second reading of the bill in the plenary hall. This is what Deputy Finance Minister Georgi Kadiev explained.
At this stage it is not yet clear whether this change will be implemented, because the European Commission (EC) holds quite a dubious position, too. Recently, the financial ministry led by Plamen Oresharski received a message from the head of the Taxation and Customs Union General Directorate, Robert Verrue. He insisted that Bulgaria forbid with a law duty-free trade along frontiers that are external for the European Union (EU). But according to the current European regulations, duty-free trade is not allowed only on borders between member states.
The letter sent by EC noted that the EU had no practice to allow the operations of such shops along its entry borders. At the same time, however, there is neither a directive that bans their existence, Deputy Minister Kadiev said. During the talks in the budget commission efforts are expected to be made for interpretation whether the phrase no practice actually means explicit requirement that no such shops should exist.
But even if these trade sites are closed, there are others of them a few metres away - for example, the ones in Turkey. The situation will certainly favour the Turkish shops, because the whole traffic will go to them. At the same time people who carry smuggled cigarettes will keep doing so but will buy them from another duty-free shop. The problem is a complex one and if duty-free shops are closed it will not mean smuggled cigarettes will disappear immediately.
Budget losses because of smuggling can be calculated only approximately, just like the share of the grey sector of the economy, for example. Figures indicate that cigarette smuggling in England amounts to 25 per cent. If we assume it is within the same limits in Bulgaria - between 15 and 25%, losses may be considered hundreds of millions of levs, Kadiev commented.
Radoslav Genov, head of the duty-free operators association, said that the way Robert Verrue treated the European regulation was incorrect. In the EU itself, when a traveller arrives from a country that is not community member, he is allowed to buy free of duty up to 1 package of cigarette boxes, 1 litre spirits and other goods worth up to EUR175. The duty-free trade bill that is under preparation at the moment will restrict people who enter Bulgaria to buy up to 1 package of cigarettes and 1 litre of spirits. Duty-free oil stations in particular will not be allowed to sell more than 500 l of petrol to each car.
Genov added that if the MPs decided to shut down duty-free trading at the stations of Kalotina and Kapitan Andreevo, Turkish and Serbian dealers at the other side of the border would only make profit of it. At the same time, over EUR100MN would not be allowed to enter the Bulgarian budget, he calculated.

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