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New tax to reduce trade between Bulgaria and Greece by 20 percent

06 April 2015 / 15:04:48  GRReporter
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Anastasia Balezdrova

The Greek government's decision to impose a preventive tax of 26% on transactions of Greek companies with companies in countries with preferential tax regimes has provoked chain reactions, which will increase over the coming days.

The measure will affect mainly the deals and transactions with companies in Bulgaria, Cyprus and Ireland, the expectations on the part of businesses in the specific countries being that the European Union will not allow Athens to start implementing the law that it has already voted.

This is the opinion of Chairman of the Cyprus-Bulgarian Business Association Xenios Xenopoulos who in an interview with the Bulgarian National Radio emphasized that the revenue from this tax would not be significant but the informal economy and corruption would strengthen at the same time.

The Bulgarian Chamber of Commerce and Industry (BCCI) also presented serious objections to the tax changes in Greece and sent them to all European institutions and to the embassies of all European Union member states in Bulgaria. In an interview for GRReporter Chairman of BCCI Tsvetan Simeonov told Anastasia Balezdrova that the tax would affect at least 11,000 Bulgarian companies with Greek participation and the volume of trade between Bulgaria and Greece would decline by 20%.

Mr. Simeonov, how many Bulgarian companies will this tax affect?

The exact number cannot be specified in such a short period after the introduction of the tax. In any case, we have to account for the fact that the merchandise traffic amounts to nearly 3 billion euro, which puts Greece at the top of the list of countries with which we have trade relations.

So, no doubt, each side will be affected. It should be known that this would equally affect companies from Greece, because the information available to us shows that there are about 11,000 active companies with Greek participation in Bulgaria, which are not established to serve the Bulgarian market alone. Part of their goods return to Greece. They will also be subject to the sanction of this law because they are registered in Bulgaria which will not be in favour of their business.

The tax itself is contrary to a series of principles of the European single market. One of them is the freedom of establishment, since some companies will be forced to move their business. The main principles that the law violates are as follows:

the principle of proportionality,

the principle of legal certainty because the law is a relatively unknown institution in the relations between European countries,

the principle of non-discrimination, because it only affects three European Union member states.

In general, the introduction of similar measures to avoid the so-called tax planning or schemes to evade taxation should address specific companies, not all entities in a specific country, because the unacceptable burden of proof is thus transferred to all companies. The most unacceptable is the fact that all companies will have to prove that they have not deviated from normal tax principles. Moreover, the Greek tax administration will hardly be able to examine all documents. Therefore, there will be a selective return of amounts after the three months stipulated in the law, if the term is observed at all. Because being familiar with the administration in Bulgaria and Greece, we believe that there will be a selective return of amounts to certain companies and non-return to others. And as we know very well, this is a good source for additional undue income for the administration. That is, we will generate corruption in the Greek administration.

What is the share of trade with Greece in the gross domestic product of Bulgaria?

It is enough to say that the amount of 3 billion euro is a significant turnover in both countries. Today the entities may be 11,000, tomorrow they may be less and more at other times. However, the volumes are great, they are not negligible.

We are heavily fighting with the Bulgarian administration, striving to associate each tax and every legal change with a good preliminary assessment of the impact that a legislative act or its change would have.

It seems that this has not been done in this case because the preliminary estimates of experts show a 20% outflow of mutual trade in the first few months alone. This is a serious amount.

In which commercial sectors are those companies operating?

The main three sectors of trade from Bulgaria to Greece are the following: textile goods and materials, base metals and electric power, but also food products such as wheat, sunflower oil, petroleum oils, tobacco. The export of cheese is significant too and we are aware of the fact that cheese is often exported as a product that is ''produced in Greece'' - albeit first produced in, and then imported from, Bulgaria. All of these sectors will be affected.

Is Greece the only country introducing this tax?

The way it introduces it is unique. As I said, such laws are being implemented but they address separate companies. They outline the operative part and describe the consequences if a deal evades taxation. Then inspections of individual companies begin and some companies are obliged to prove that they have not deviated from the rules of international trade. 

Tags: EconomyCompaniesPreventive taxTransactionsTradeBulgariaGreeceBulgarian Chamber of Commerce and Industry
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