The amount of overdue tax and social security payments to the budget, along with penal interest thereon, now exceeds BGN9 billion. This debt to the treasury has been accumulated over the past 15 years. The information was provided by spokesman of the National Revenue Agency, Rosen Bachvarov, in response to an inquiry of the BANKER. As it is known the delinquencies has an automatic expiration period of five years, but it applies just as legal prohibition on requisition, and does not automatically lead to deletion of the debt, also explained Mr. Bachvarov. This way, although more than half of these arrears can no longer be collected through enforcement procedures, the tax authorities continue to keep their records.
Nine billion levs is an enormous sum for Bulgaria. It is almost equal to the So annual expenditures of the Treasury on pensions. The sum is more than half of the entire budget revenue in 2012 budget, which is expected to reach BGN17 billion. The estimated gross domestic product this year is seen at BGN81.63 billion, which means the overall arrears in tax payments and social contributions exceed 10% of it.
The accumulated corporate debts to the Treasury are also truly shocking, but they have their simple explanation – the crisis. Data from the National Revenue Agency for the end of the first year of crisis shows that the average annual volume of outstanding tax liabilities jumped to around BGN850 million. In the following two years the problem deepened.
In terms of economic growth and better business conditions, the average duration of non-paying arrears was shorter, but the crisis initially raised the average period of outstanding liabilities to 9 months (and now it has reached about two years). Companies now prefer to go bankrupt than pay tax, authorities comment.
The problem gave rise to a discussion about possible amnesty on overdue interest. The entities who pay their arrears to be exempt of the punitive interest on them. This turned out to be an exotic and controversial idea, that can actually bring money to the treasury but in the same time – demoralize regular tax payers.
Governments usually think of various forms of tax amnesties, when the situation becomes problematic and all measures for enforcement of state claims have been exhausted.
A possible interest amnesty for overdue taxes and insurance will bring tens of millions of levs to the budget from non-paying enterprises and citizens, said optimistically the Deputy Finance Minister Vladislav Goranov. But the fact is that he is the only public figure that stands behind such an initiative.
One of the most deeply guarded state secrets now is: for whom and for what period the amnesty may apply.
Steps have been taken not to publicize such information, because, contrary to expectations such a move can cause an avalanche of debt to the treasury from entities who may not start waiting for interest amnesty.
NRA is silent. Everything is prepared in Taxation Plocicy Department of the Finance Ministry and nobody is asking us for advice, said Rosen Bachvarov, spokesman for the NRA. Tax authorities only prepare secret reports on debt by sectors and types of companies and send them to Minister Dyankov.
According to a source of the BANKER, though, top officials of the ministry are currently working on three options. One of them is for amnesty on penal interests only stemming from social security arrears, the second – only from taxes, while the third combines the first two. It is not clear what the period of amnesty could be, but rumours put the time frame between one and three months. In the corresponding grace period, debt can be repaid, leading to waiver of accumulated interests.
Executive Director of the Confederation of Employers and Industrialists Evgeny Ivanov said that the idea for an interest rate amnesty is a good one. He claims that it copies a proposal that the Confederation made yet in 2010 and said that interest on debts to the treasury are huge and companies prefer to go insolvent rather than pay. Other heads of employers’ organizations and trade unions are also big fans of such a project.
Financiers, independent economists and representatives of the opposition, however, are against the interest window.
Strong opposition to the measure was heard from exFinMin Oresharski. He said the move carries a high moral risk and in the long run will cause negative effects. Such is the opinion of economist Georgi Angelov: I am absolutely against this measure because it will punish honest payers and this will exacerbate fiscal discipline.
