Businesses Use Loopholes to Avoid Taxes in Bulgaria - Report

Business » FINANCE | March 5, 2017, Sunday // 10:21| Views: | Comments: 0
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Bulgaria: Businesses Use Loopholes to Avoid Taxes in Bulgaria - Report File photo, BGNES

Big corporations manage to avoid paying taxes in Central and Eastern Europe even when rates are as low as they are in Bulgaria, a report by several NGOs in the region has shown.

Bulgaria enjoys one of Europe's lowest individual income and corporate tax rates, a flat 10%.

Indirect taxes thus put the main burden of the companies' activities on the population itself, according to the text titled "Runaway Taxes - Who pays tax in Central and Eastern Europe?"

The report "was inspired by Dimitar Sabev, a tax justice campaigner in Bulgaria, who had already carried our research into this area in 2015." He found that, as of that year, the top 10 companies by revenue in Bulgaria had received a net tax credit.

"In other words as a group, the ten biggest companies in Bulgaria received more from the state in terms of tax rebates and offsets than they put back in."

"Looking at the tax structure of Bulgaria we can see that corporations as a whole pay more than in other countries in our study, and there is a more equal balance between the amount paid by corporations on their income and by individuals. Social Security contributions are also relatively low.

However, the relatively low levels of tax paid by people on their income is made up in other indirect taxes paid by individuals. Compared to other countries in our study Bulgaria collects more in excises, taxes on individual items such as alcohol and tobacco, and on VAT than any other country. These taxes, of course, raise the cost of living and are generally considered to be more regressive than direct taxes."

Dimitar Sabev writes:

"The ten companies with highest turnover for 2015 in Bulgaria paid a combined BGN 44 M (EUR 22.5 M) in corporate taxes. This is a relatively low contribution to the national budget.

The top ten Bulgarian companies’ combined sales amount to roughly one quarter of the gross domestic product – yet the tax receipts from their business are equal to only 2.3 percent of the corporate taxes collected for the last year."

He also argues "the Bulgarian business top ten is, strictly speaking, a receiver of taxes" as "the corporate tax laws allow for deduction of former losses from the tax base, and there are many companies in Bulgaria that declare losses for many years," the state itself being the biggest user of such tax credits.

Techniques used to reduce profits and taxes include calculating enormous expenses for external services like consulting and management fees worth thousands of euro per day.

While transparency regarding taxes is relatively high in Bulgaria, this does not lead to a better public analysis and discourse as "by providing or withdrawing advertising revenue, the biggest companies can control the narrative on taxes in the national media."

"If one is big enough one could not bother paying taxes. The loopholes in the public finances opened by “smart” Big Business are offset by onerous invisible taxes levied on the general – and indifferent public," Sabev concludes.

In Bulgaria, the statistics for the top ten companies were compiled by Za Zemiata, accompanied by some further research.

The report is available here.

 

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Tags: tax avoidance, taxes, Za Zemiata, Dimitar Sabev
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