GRREPORTER - New tax to reduce trade between Bulgaria and Greece by 20 percent
New tax to reduce trade between Bulgaria and Greece by 20 percent
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 almost produced in Greece. All of these sectors will be affected.
Is Greece the only country introducing this tax?
The way it introduces is it 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.
The Greek tax administration is too ambitious if it thinks that it will be able to unravel within three months transactions with volumes of nearly 3 billion euro. This law will simply cause delays. For us, as people who are engaged in trade and who know the financial practices and tax administration, including of Bulgaria, this is probably done with the secret hope to raise funds in the form of a credit for the financial balance of Greece, which is in a difficult situation. But this is not the proper way, because such concentrations of funds that otherwise would have worked for the economy of Bulgaria and especially of Greece will hamper companies to develop. Thus, the crisis will worsen and the spiral will not uncoil in the direction opposite to the increase in turnover but to that of revenues.
Has the Bulgarian Chamber of Commerce established contact with the Greek government or the Embassy of Greece in Sofia to express its position on the tax?
Our collective body has issued a decision under which today we will inform not only the Greek Embassy but also other European Embassies and European institutions. We needed some time to analyze the law itself after its release, do some calculations and comparative review to determine what I have already said, namely that this is not a traditional way of raising funds from companies involved in trade between the two countries.
Incidentally, the law also affects Cyprus and Ireland and it will therefore accumulate negative effects for Greece. That is, it itself will be the biggest loser.
Are some countermeasures considered in Bulgaria?
Honestly there are many such voices but BCCI is not one of those institutions that wish to worsen the relations in some way, because if we take countermeasures, I do not know how well they will be considered and whether they will not be of a greater amplitude than those of Greece. This would cause new countermeasures on the part of Greece.
I do not consider this scenario, because it is unacceptable for the European Union, but if we take that path, very soon we will turn from countries with trade transactions amounting to nearly 3 billion euro into countries that do not know their economies. This is not the objective. In the European Union, we must take action to free the market, maintain the equal treatment of companies, regardless of which EU member state the good or service comes, and open national economies to free movement of goods, services, capital and people.
How has the economic crisis in Greece affected the Bulgarian - Greek business relations? Is there a decline in some sectors?
We cannot accept that the crisis could have an impact so quickly neither do we talk about the fact that the imposition of the tax is a consensus policy of Greece in order for it to affect the Bulgarian - Greek relations. We look at Greece as one of the most important investors in Bulgaria and such temporary things generally could not and should not affect our relations in a strategic plan. To the contrary, we must take measures, and I think there are already such both on the part of the Union of Chambers of Commerce and Industry and the Union of Entrepreneurs in Greece, which negatively assess this step.
Of course, we are obliged and will have to inform the international organizations, including the International Chamber of Commerce, the Association of European Trade Chambers. This is not to the detriment of our Greek partners because as I have said they also believe that this action does not contribute towards the development of economic relations.
Because we keep good records of history at BCCI, we can rewind the tape and see that the crisis and the problems with balance of payments are not happening for the first time in Greece. There is information that this happened back in 1896-97 too. In other words, the current situation is not an isolated case.
I hope that Greece will come out of this economic situation because the Greek economy has many investments abroad and is not an economy that can easily surrender. Therefore, I look at things optimistically, believing that Greece will overcome these temporary deviations from best practice and will again become a regular payer and a good destination for foreign investment.
In which areas do you think there is potential to further develop the business relations between Bulgaria and Greece?
The lines are two. There are areas that overlap in terms of production . These are the larger part of agricultural products, but not all. Competing closely, the two economies are becoming stronger, and the producers more competitive. Otherwise, we have benefited from the fact that Greece delivers quality products such as citrus and other crops that cannot grow in Bulgaria at good prices and is therefore a desired partner.
There are industrial products too. We are competitive in the field of pharmacy. The automotive parts industry has recently developed as well as the processing of products, and there are no significant differences in the way of processing of agricultural products. This is a complement and good coexistence, and a possibility for citizens of both countries to have a wider range to choose from when they want to satisfy their needs.