VAT Fraud Becomes Focus For Bulgaria

by Ulrika Lomas, LawAndTax-News.com, Brussels

18 August 2009

As part of its recent drive against tax crime and evasion, Bulgaria has turned its attention to VAT fraud, attacking the problem on various fronts.

The country’s Revenue Agency has created mobile teams to crack down on the level of VAT fraud, and will initially concentrate on the capital, Sofia. The announcement comes after Bulgaria reported it would be taking a careful look at imports, particularly of fruit and vegetables from Greece and Macedonia, in a bid to stem the BGN2-3bn (USD1.4-2.2bn) annual loss in excise duties. As of July, Bulgaria had collected only 37% of the expected VAT revenue for 2009. Prime Minister Boyko Borisov has stressed that the government will be aiming to address Bulgaria’s budget deficit by stopping contraband and tackling VAT fraud.

Last week, tax inspectors, police and customs officers investigated 16 companies in a bid to uncover fuel smugglers, checking on 82 fuel tanks that had crossed the border from Greece. An undisclosed number of companies involved in the deception are reported to have ceased fuel deliveries. Deputy Prime Minister and Interior Minister Tsvetan Tsvetanov claims that the illicit trade in contraband fuel amounted to some BGN400,000 in lost VAT revenues each month.

The Revenue Agency has said it is looking to create software in an attempt to better control VAT return reporting in order to limit fraud. The Agency will also address business needs in turning around VAT returns more speedily; as of April 2009, it is estimated that over BGN600m in refunds were outstanding from the Agency to companies desperately in need of such funds at a time of recession.

Bulgaria has stepped up its drive against tax corruption to avoid EU sanctions. In addition to the measures outlined above, reports emerged last week of legal action being taken against energy businessman Hristo Kovachki, who is alleged to have been involved in a BGN10m tax fraud, possibly through some of the more than 40 companies with which he has dealings. The case is reported to be similar to another, in which it was estimated BGN40m in VAT was defrauded from the Revenue Agency.

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