Duty hike in Bulgaria prompts parallel concerns

Tina Milton

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Duty-free sales in Bulgaria are set to benefit from a rise in excise duty on liquor and tobacco, but Customs officials are concerned the price gap will drive the grey market

A big hike in liquor and tobacco duties in Bulgaria is set to benefit duty-free sales at the country's border stores, but Customs officials fear the gap in prices between duty-free and the domestic market will encourage parallel trading. The rise in excise duty from 31.8% to 48%, implemented on January 1, has resulted in big price increases on the Bulgarian high street.

Bulgarian Duty Free Association president Radostin Genov explained: "The government was forced to introduce [the rise] as a further step to harmonisation with EU legislation, and we have yet to reach the minimum rate of 57%. As a result, the prices of Bulgarian liquor and tobacco have increased by about €0.50 ($0.60). For example, the price for a pack of Victory cigarettes on the local market has increased from €0.81 ($1) to €1.32 ($1.60). The duty-free price is €0.50."

Imported cigarette brands have also dramatically increased in price. A pack of Marlboro cigarettes sold for €2.4 ($2.92) on the local market can be found in duty-free for about €0.85 ($1.03), depending on the location of the border shop and on the operator's price policy.

Genov said: "The problem is that the government is worried that some passengers will buy more than the permitted duty-free allowances of one carton of cigarettes and one litre of alcohol and then sell the products illegally in the local market."

To address these concerns the government has initiated stricter controls on duty-free purchases at border checkpoint sites. But Genov warned that heavy-handed treatment from Bulgarian Customs officials could persuade travellers to buy their products from neighbouring Serbian or Turkish duty-free shops.

"Some [Customs officials] are asking customers for their passports and opening their bags to look inside," he explained. "Customs and excise officers can check the purchases of passengers but only at Customs control points. The checks should not take place inside the store or by the store entrance as it has a negative impact on duty-free sales and passengers can be scared off."