Bulgaria complains to Commission about new Greek tax

Bulgaria complained to the European Commission on Monday (30 March) about a new Greek law battling corporate tax avoidance that Sofia warns could undermine trade between the Balkan neighbours. In a letter to European Economic Affairs Commissioner Pierre Moscovici, Bulgarian Finance Minister Vladislav Goranov took exception with Athens' introduction of a 26% withholding tax on Greek business transactions originating in Cyprus, Ireland and Bulgaria -- all of which have minimalist corporate tax structures.

Goranov called it "a discriminatory and disproportionate measure" and warned of a "deterioration of bilateral economic relations" between Bulgaria and Greece as a result. According to Dnevnik, the EurActiv partner in Bulgaria, Greece’s aim is to fight tax avoidance via Bulgaria, where the corporate tax is lower (10%). Athens would therefore tax by 26% (the percentage of corporate tax in Greece) all deals with Bulgaria, and would return this tax only when it would be proven that their aim was not tax avoidance. Goranov's letter blasted the measure for "assuming that all transactions originating in these three EU states represent fraud or tax aversion".

Recent years have seen a considerable spike in companies filtering business deals through affiliates in low-tax nations. Greece has a 23% value added tax compared with Bulgaria's 20%, for example, while the difference in corporate tax rates is even greater. An estimated 14,000 Greek companies have operations in Bulgaria. Following protests from employers’ organisations and businesses, the withholding measure was amended to exempt transactions whose legality is deemed "evident". But that softening has failed to quell claims -- which Bulgaria now echoes -- which the selective nature of the tax's application is discriminatory and in violation of basic EU laws.

*************************************************************************

Bulgaria to fight corruption with new state body

Bulgaria’s Deputy Prime Minister Meglena Kouneva said that the Cabinet will set up a new body to fight corruption, as envisioned in the updated government strategy on preventing corruption.

In an interview with Bulgarian National Radio on March 31, Kouneva said that the strategy was ready and the last step was the Finance Ministry giving its approval to the financial aspects of the document. She gave no timetable as to when the strategy could be submitted for discussion by the Cabinet.

Kouneva, as the Deputy PM in charge of co-ordinating European policies and institutional matters, has been working on reshaping Bulgaria’s approach to fighting corruption since taking office in November 2014. During that time, she has held several meetings with Romanian top officials, saying that Sofia should emulate Bucharest’s success in pursuing corrupt officials.

*************************************************************************

Bulgaria struggling to deal with pension system's strain on economy

For all the noisy debate in Western Europe about foreign workers, mass emigration puts economies of former Eastern Bloc members under pressure, a recent Reuters argues while discussing Bulgaria's demographic problems.

The article, which is titled "As Bulgaria Empties, Government Struggles to Dole Out Pension Pot," points to the fact that the share of Bulgaria's pension system in the central budget is currently 37.5%, up from 12.8% in 2003, partly due to "the exodus of Bulgarians since Communism fell in 1989." Reuters quotes Labor Minister Ivaylo Kalfin as saying this could increase by 70 percent in ten years.

Against this backdrop it reminds that in Bulgaria the average age to receive old age pension is 57 and this is the EU's lowest together with Poland, Romania, Slovenia and Slovakia.  The text summarizes some of their problems in the pension system, such as employers dodging insurance contributions, a surge in claims for disability pensions, and the shrinking percentage of younger voters who are net contributors to the budget.