RISK FOR TAX PROCEEDS
Ms. Mourgina, have your expectations for increased proceeds from insurance instalments and taxes this year come true? What are your calculations about revenues in 2007 considering the fact that there will be an additional 2% reduction of the tax burden?
- Proceeds from insurance payments and taxes for the first five months of this year are higher than expected. We have collected BGN135MN more from corporate taxes, BGN113MN more from excise duties and BGN6MN more from healthcare insurance instalments as compared to 2005. Revenues are going up despite the reduction of the tax burden. That is a sign of economic development and of the more efficient operation of the National Revenue Agency. We have been convinced many times in recent years that the decrease of tax rates improves the voluntary observance of legislation.
Could any risks arise for the fulfilment of the projected 2007 budget revenues in connection with the enforcement of the new tax laws, harmonized with European legislation?
- Yes, there are risks. It's not a secret that proceeds from value added tax after Bulgaria's accession to the European Union will go down due to purely objective reasons. We'll step onto the single market and import as an important source of value added tax proceeds will drop out. Another threat to the budget are the active European value added tax swindlers. The practice of the European Union's new members which joined it before us shows that the attempts for draining value added tax have multiplied in the months after the accession. We realize these hazards and we are preparing for that.
Is the development of the National Revenue Agency info system's software being delayed? When do you expect it to be completely set up?
- The work for the establishment of the agency's info system is still going on and I expect it to be finally introduced by the end of 2006. Six of its modules are being currently tested. For the purpose teams were formed with representatives of the Central Department of the Sofia Tax Administration and of the Big Taxpayers and Insurers Directorate. The new info system will offer new services to our clients and will considerably shorten the time, necessary for servicing. In the requirements to the system we have included the possibility that each client could be serviced in any office of the National Revenue Agency, a fully electronic exchange of information between the agency and its clients, INTERNET access to data from the tax insurance accounts of firms and citizens. The introduction of the info system will make things easier not only for our clients, but for the agency itself as well, because we'll be operating much more efficiently with the new software.
The head of the Parliamentary Budget and Finance Commission Peter Dimitrov said it was possible that problems regarding draining of value added tax could arise namely due to the lack of an info system. Is there such a danger?
- I've already mentioned that the threats regarding this tax are of a somewhat different nature. Presently, we are working for the implementation of the so-called VIES system, allowing all tax administrations in the European Union to exchange information about the deals liable to value added tax within the community. That guarantees that any attempt at abuse on the part of firms from various member-countries will become known to the tax authorities. Last year we bought the necessary equipment, i.e. servers and computers, and trained employees to work with the system.
Has the National Revenue Agency the capacity to completely undertake the administration of the value added tax as of next year, especially when control on imports from third countries goes from the customs to the agency in the beginning of 2007?
- Until 2003 the National Revenue Agency was servicing both value added tax collected from deals within the country and abroad. The volume of work was considerably greater than it will be after Bulgaria joins the European Union when in fact value added tax will be imposed on imports from third countries outside the European community.
Is the agency ready to check the trustworthiness of politicians' property declarations as well?
- The National Revenue Agency's programme for natural persons' inspections compares Bulgarian citizens' property and the incomes' declared by them. For three years now the programme is used for inspecting people whose real estates and vehicles cost considerably more than the incomes, stated in their tax declarations. For us the criterion is not if someone is a politician or not, but if he has honestly declared his incomes and if he is paying his liabilities. If politicians come into the scope of that programme, they will be inspected too. I would like to underline again that there are no privileged taxpayers for the National Revenue Agency.
When will the construction of the agency's head office in Sofia be completed? How much will the completion of the building in Tsarigrasko Shousse (the former building of the Rodina Printing and Publishing House) cost?
- There is decision of the agency's Management Board for the building's completion. Estimates are now being made about the repair's worth. According to our expectations, the reconstruction will be completed in the third quarter of 2008. That building will allow us offer the agency's clients comfortable halls for services, quite different from the present ones. I have to confess that the conditions in some of the agency's offices in Sofia are beneath criticism. We owe our employees and clients a better working environment.
You said you wouldn't be tolerating any instances of corruption in the system of the National Revenue Agency. How many signals about corrupt employees of the agency have been received so far and how have the abusers been punished?
- The battle with corruption inevitably begins by the acknowledgement that it exists. In the last six months I fired six of my employees due to corrupt practices. Four of the cases have been moved to the prosecutor's office. We have opened a round-the-clock telephone which any citizen could call and make a signal about corruption of an agency employee. We are currently introducing a system for unexpected checks of the agency employees' work. It will allow us analyse all deviations from the normal labour obligations and their possible link with corrupt practices. I shall not allow the prestige of the entire administration to suffer due to the acts of a small number of unfair officials.
The National Revenue Agency has launched this year a campaign to popularize among the public the possibilities for paying taxes, insurance instalments, etc. via INTERNET. How much does that campaign cost?
- The agency's info campaign is a part of the services which Adam Smith International are providing to the National Revenue Agency as consultants in external communications under the project for a reform in the revenues administration. As you know, it is financed by the World Bank. The media budget is worth a total of EUR146,911, including a national representative sociological poll, drafting of a strategy, and production of radio, TV and printed info matter. 95% of that amount is a loan from the World Bank, and 5% comes as co-financing by the budget. Independent of that money, ensured under the loan agreement, we made additional efforts and with the assistance of national and regional mass media succeeded to broadcast a series of explanatory materials, info clips and ads of the National Revenue Agency free of charge, from which the budget saves more than BGN270,000.
Do you have proposals for legislative amendments, intended to incriminate non-payment of taxes and set up the so-called tax police?
- The most recent legislative initiatives concern value added tax frauds. That is the so-called joint liability of suppliers when they knew or were obliged to know they were a part of a value added tax chain. Such a practice already exists in Great Britain, Germany and the Netherlands, where liability spreads not only on the individual user of the tax benefit, but on his suppliers as well, who knew or were obliged to know they participated in an attempted value added tax drainage. Moreover, through legislative amendments the counteraction to value added tax abuse has to go through the joint work between the National Revenue Agency, the Ministry of Internal Affairs, and the prosecutor's office. And it is only though joint efforts that we could succeed in the struggle with illegal practices and assist for the improvement of tax discipline.
Don't you think that as the task of the National Revenue Agency is to collect part of the Exchequer's proceeds, the position occupied by you at present should be with a fixed mandate?
- The agency's operation and the terms for the appointment of its managers are set by the law on the National Revenue Agency. On its grounds a Central Department was established as well, which functioned for about a year and a half before the agency really began operations. While the law was under draft there were discussions about if the agency should be subordinated to the finance ministry or to the National Assembly directly, which presupposes that the position should be with a fixed mandate. The opinion which prevailed then was that in order to have a more efficient control over the agency's operation it should be under the finance ministry's umbrella. Thus, the finance minister has the opportunity to supervise the processes of collecting budget revenues and at the same time not concentrate too great power in the hands of a single person.