The Bulgarian State will Pay You if You Report Someone for Hidden Taxes

Business » FINANCE | May 31, 2022, Tuesday // 16:47
Bulgaria: The Bulgarian State will Pay You if You Report Someone for Hidden Taxes @novinite.com

The quadruple ruling coalition is planning a controversial incentive to increase tax and social security collection. The government proposes that from 2023 a bonus be introduced for every citizen and company that has helped the tax authorities with information to establish hidden taxes and social security contributions. The bonus will be 10% of the additional income entered into the treasury thanks to the signal.

To make this happen, the government will amend the Tax and Social Security Procedure Code, which regulates the procedure for establishing tax liabilities. According to experts, the measure is very controversial and could lead to legal chaos, harassment and blocking of the tax administration

The proposal for payment of 10% of the additional revenues established on the signals of citizens and companies is written in the package of anti-crisis measures. The details of the implementation of such an incentive are still unclear, and can only be expected in the autumn with the introduction of the regular package of tax laws with the preparation of the 2023 budget. However, according to experts, the measure is extremely problematic and could block the work of the administration, lead to false signals and incite citizens and companies.

At the moment, the tax authorities accept signals for tax and social security violations, if they are submitted in compliance with the rules of the Administrative Procedure Code. The Code allows proceedings to be instituted only if the alert is not anonymous and concerns violations committed in the last two years. The establishment of additional obligations itself takes place after an audit, which is assigned by an explicit order, and the audit act, in case obligations are established, must enter into force. Possible payment of part of the findings may be only after this stage, experts say.

The main risk in introducing such an incentive is the mass submission of signals and the blocking of the tax administration. Currently, the NRA performs inspections and audits according to specific algorithms. The tax authorities carry out regular checks on set-off and refund, which concern mass VAT, checks for comparison of income with property, annual and thematic checks of various risk groups. In 2021, for example, according to the tax report, there were inspections of persons with significant inventories reported on the background of the activity, inspections of individuals who acquired expensive properties in a certain price range, cash checks, inspections of individuals with real estate in Dubai, audits of expensive car owners, gambling law inspections. Control was performed in commercial sites, etc. In performing this control activity, profiles and behavior, degree of risk and other indicators are analyzed. It is not clear whether the new signaling mechanism will set any thresholds of significance so as not to flood the administration with small signals.

It is clear from the report of the National Revenue Agency that for 2021 the tax authorities have established BGN 916,068,000 million in additional liabilities after audits, as BGN 11.3 million are the additional contributions established. 33% of the audit acts have been appealed.

For the time being, the social partners are refraining from commenting on the measure precisely because of the lack of clarity. "We cannot express a specific opinion, as there is no clarity about the mechanism and procedure by which it will be applied, what kind of publicity is expected, the existing variable duration of the process of issuing a revision act and its possible appeal", is the opinion of BIA.

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