Bulgaria targets tax anomaly

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Duty-free operators come under scrutiny in a new initiative to clamp down on tax evasion

In its latest assault on the country's duty-free outlets, the Bulgarian finance ministry has proposed that operators pay tax as a percentage of their turnover, rather than on profit. The move is intended to end the practice of companies transferring part of their profits to loss-making activities in order to avoid paying tax on the full amount.

Bulgarian Duty Free Association chairman Radostin Genov told TRW that the move was unexpected. ?There has been a statement from [finance minister] Milan Velchev on addressing such illegal activities in some sectors,? he said. ?But duty-free is a very different business, so we are very surprised by his attitude. We don't know why duty-free is the object of this.?

Genov added that the industry in Bulgaria had been adversely affected by the uncertainty over the government's plans for it. ?The government is to create a code for the duty-free business in Bulgaria, but we don't yet know this will affect us,? he said.

Earlier this year, the industry in Bulgaria was boosted when government plans to close border stores in an attempt to combat smuggling were undermined by a lack of support in parliament. ?A majority in parliament has given us its support,? said Genov.  ?It was a victory for Bulgaria. If duty-free stores had been forced to close down, the economy would have lost a lot of money. It is a victory for parliament and sense.? Duty-free sales in Bulgaria increased by about 30% last year.