Bulgaria’s Commission for Protection of Competition (CPC) decided to bury the so called golden standard for the faster reimbursement of VAT. On May 27, the CPC adopted a statement on compliance with the competition rules of the draft order of the Executive Director of the National Revenue Agency for the introduction of an accelerated 10-day refund period to firms that meet a specific set of criteria. Proceedings before CPC was formed at the request of the former finance minister Kalin Hristov.
In its analysis of the criteria for the golden standard CPC found that its introduction would lead to unjustified exemptions to the general terms for VAT only for a limited number of companies as they will enjoy a shorter time for a VAT refund.
The golden standard in the above criteria would put at disadvantage small and medium enterprises as well as new entrants, because they will not be able to satisfy the condition for a total volume of claims for VAT refunds, or the condition of a three-year tax history the statement reads.
According to the CPC the draft ordinance for the golden standard for VAT would lead to increased barriers to market entry, which will affect the increase of concentration in certain markets, with the risk of stimulating mostly companies with large market shares. Such a situation contradicts the primary objective of the competition law – namely, promoting free enterprise in business, opening up markets and creating conditions for new entrants in the relevant markets.
Furthermore, the provisions of Article 60, paragraph 2 of the Constitution of the Republic of Bulgaria, which says that tax benefits and burdens may be imposed only by law and established practice of the Constitutional Court, the CPC advocates principled position that the criteria for the golden standard should be established by law, if that is considered appropriate by the authorities who have the right of legislative initiative.
The Commission proposes to the competent authorities to take measures of a legislative nature, to overcome the potential distortions of competition and thus achieve the goals set in the golden standard idea. The experts of the commission recommend the adoption of uniform, objective, clear and public criteria that guarantee the equality of all actual and potential participants in the relevant markets in accordance with the rules of state aid under the Treaty on the Functioning of the European Union.
This way the credibility of the proposed idea went almost to zero. Interestingly, the longing to benefit the giants of Bulgarian economy was so intense that the Treasury led by ex-Minister Dyankov prophesied introduction of the standard.
A message on the website of the ministry from February 22 said that the NRA experts have developed 12 clear and public criteria for meeting the requirements of the golden standard. One of them is the condition that each company in each of the preceding three years must have filed at least four claims for VAT refunds totaling over 1.2 million levs per year. Finance Ministry expected the measure to be introduce as of the beginning of March 2013.
After that foretold success of the new anti-crisis measure, developed by Minister Dyankov, things started to change. By a decree of 13 March this year, President Rosen Plevneliev appointed a caretaker government headed by Prime Minister Marin Raikov. Official government records say that the introduction of a golden standard is in its priorities and Finance Minister Kalin Hristov said that the practice will probably start to be applied from the beginning of May, not March as promised by the their predecessors.
On 25 April, the Ministry of Finance (MoF) has asked the Commission for Protection of Competition (CPC) to decide whether the measure will lead to any form of business discrimination.
The BANKER
