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Expert: Bulgaria Loses BGN 3 B Annually from Economic Crimes

Date: 16.08.2009

Economic crimes incur annual losses of about BGN 3 B to the Bulgarian state budget, Nikolay Ivanov, a former head of Bulgaria's Financial Intelligence Agency.

Ivanov, who was the first director of the Financial Intelligence Agency when it was created in 2001, has said that the data of the Italian Taxpayers' Association that Bulgaria was third in the EU in tax evasion must be correct, as quoted by BGNES.

He explained that the economic crimes in Bulgaria were of two main varieties - fraud with Value-Added Tax, and gray economy.

Ivanov cited data of the Center for Study of Democracy, a Sofia-based think tank, showing that between 25% and 35% of the Bulgaria economy was in the gray sector, which had a total annual turnover of about EUR 6 B (BGN 12 B). He pointed out that if taxed with VAT and corporate tax these economic activities should bring BGN 3 B to the state budget.

Ivanov also said the Bulgarian state had to reimburse firms committing VAT fraud with about BGN 1,5-2 B per year. The VAT crimes are committed by fictitiously increasing the turnover of a firm through the purchase of non-existing goods and services and reselling them to phantom firms at higher prices. According to Ivanov, the most risky sector for VAT crime is the grain trade.

Ivanov, who headed the Financial Intelligence Agency (2001-2002), said Bulgaria needed a new law against money laundering, and boosting the Agency's powers the way they were before 2002 when it worked on an American model.

"After 2002, when it was stripped of the powers to reveal crimes, and the obligation to alert the prosecutor's office only if there was a suspected crime, the FIA turned into a mailbox, or, rather, an archives bureau", Ivanov said adding Bulgaria's financial intelligence had lost international prestige because it had failed to sign agreements with its US and UK counterparts.

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