GREY ECONOMY RELIEVED OF BGN400MN ONLY
In the course of discussions on the 2004 draft budget the Finance Minister Milen Velchev surprisingly announced BGN400MN in additional revenues to the Treasury for 2003. The money was been accumulated as a result of the successful application of the package of measures for fighting grey economy and contraband, anounced by him in mid-May. Then he launched eight steps, intended to bring shady economy into the light. Part of the strategy projected the establishment of a National Revenues Agency, introduction of programme budgeting for the ministries, closing down of 47 of all the 54 duty-free shops, and setting up a new service for fiscal investigations, better known as tax police. Mr. Velchev's package of measures was supplemented by proposals for restriction of frauds, connected with draining of VAT, tightening of customs control, measures against illegal software, setting up a call centre for sumbission of information bҐtween the Finance Ministry and its subordinate agencies. But the announced budget surplus of BGN400MN will hardly improve Bulgaria's position in the rating of countries regarding the share of grey economy in them. According to the British publication Economist Intelligence Unit, shadow economy in Bulgaria accounts for about 32-35% of the gross domestic product (GDP). Experts of the NGO Coalition 2000 claim that 28% of the consumption and services sector in the country get around the law. A project for opening a regional branch of the Revenues Agency was implemented in the Bourgas region, in line with the struggle for restricting the operation of the grey sector. In the beginning of July the Chief Taxation Director Nikolay Popov and the Mayor of Primorsko Dimiter Dimitrov signed a special agreement, entitling the taxation authorities in the municipality to set the size of the local dues and taxes and to collect them. At a seminar in Borovets, dedicated to the new tax policy, Mr. Popov announced that the experiment in Primorsko was very successful. The data, according to him, showed that the proceeds from local fees and taxes in the seaside municipality for the July-October 2003 period increased 53% as compared to the same period of 2002. The draft budgets for 2004 of the Ministry of Transport and Telecommunications, the Ministry of Labour and Social Affiars, and the Ministry of Environment and Waters, may also be added to the achievements in that respect. Their expenditures in the future will be calculated on the basis of specially drafted programmes and measures for financing. The projected introduction as of January 1, 2004 of new excise duty labels with a hologram sticker and special protection can be regarded as a partial success against frauds excisable goods. However, the idea for setting up a tax police seems hardly realizable at the present stage. The Finance Ministry proposes that the tax police should practically take up part of the functions of the prosecutor's office, of the investigation service and of the police when investigating financial crimes. This, however, is not to the liking of quite a number of representatives of the judiciary, magistrates claim. Many economists believe that that the draining of VAT should be counteracted not so much through overall control but by reducing the rates of direct taxes, which would stimulate firms and citizens to pay them. According to financiers, the introduction of the VAT-account and the reduction of term for returning the tax credit last year have forced traders to declare most of their transactions. However, the research of the Centre for Social Practices has established that still more than 80% of the traders in small establishments do not always issue bills for the purchased goods. Things regarding the natural persons income tax look similar. According to the NGO, researching the consequences of the grey economy in 2002, 237,000 taxpayers did not file tax declarations, and 47,000 declared incomes smaller than those which employers reported as expenses. Therefore, it is not surprising that non-paid taxes amount to BGN1.5BN. The tightening of customs control seems arguable. After the customs boasted of a record high collection of dues and taxes, amounting to BGN 2,592,097,876 for the first nine months of 2003, the IMF Mission Leader for Bulgaria Jerald Schiff downcasted them by his statement that the growth of customs proceeds was rather due to the increased volume of imports by 40 per cent.