The Ministry of Finance has produced a new episode of the series "Should we cry or laugh". In the package of changes to tax laws that should patch up next year's budget, "Sega" discovered a puzzling text.
The text in question, which refers to construction, is for some reason stuck in the draft amendments to the Gambling Act, while referring to a completely different law - on cash payments.
The proposal of the Ministry of Finance states: "Payments between construction companies, contractors and subcontractors under contracts for construction or installation activities, supply of construction materials, machinery or equipment, as well as the provision of related services, including partial payments and/or advance payments" can only be made by transfer or deposit into a payment account.
In short, every payment in the construction sector - whether it is for 1 million or 100 euros, must necessarily go through a bank or a digital wallet.
Here are the reasons
of the team led by Galab Donev: "The construction sector is characterized by the widespread use of subcontractors, who are very often small businesses and individuals. Cash payments create the prerequisites for difficult traceability of financial flows, concealment of income, undeclared employment and the use of fictitious expenses to reduce tax liabilities. By banning cash payments along the chain, conditions will be created for more effective control over the services actually performed, the declared income and expenses, as well as the fulfillment of the tax and social security obligations of all participants.
The Ministry of Finance specifies that the idea is to "make all payments in commercial relationships between participants in the construction process be made by bank transfer or through other traceable electronic payment instruments, so that there is a reliable documentary trail of the operations performed and a more effective comparison between the agreed activities, the actually performed payments and the declared data to the revenue administration."
It sounds ambitious and serious,
but only at first glance. In fact, a ban is being launched on something that is already prohibited. The law on the restriction of cash payments now prohibits counting by hand amounts exceeding 5,112 euros (10,000 leva before) - not only for construction transactions, but for all sectors. And construction services, materials and equipment are already so expensive that there are almost no transactions under 5,000 euros - even a banal roof repair or bathroom renovation costs more and therefore the payment cannot be in cash.
Furthermore, it is ridiculous to propose a "complete ban" on cash in construction, given that the authorities cannot control even the largest payments under public procurement for large projects such as highways, water and sanitation, and so on. An emblematic example is the missing bags with millions of levs, paid by hand as advances for the "Hemus" highway.
There is no data on the amount of fines and penalties imposed so far for unauthorized cash payments in construction. The Ministry of Finance has not presented estimates of what additional revenue it expects the proposed ban on cash to bring to the state treasury.
The situation is very reminiscent of the drama with homemade rakia, for which the ministry proposed an absurd and completely fruitless text for a ban, then explained that critics had not understood the text, and finally promised to fix it.
The draft amendments to the Gambling Act, which also includes the ban on cash payments in construction, is in the public discussion phase. The deadline for submitting opinions expires on October 23.
What the current law says
The restrictions on cash payments apply to any transaction - between two companies, between a company and an individual, between sole proprietors. The law provides for fines for violators - both for the payer and the recipient of the money. For individuals, the penalty is 25% of the amount, and for legal entities - 50%, with the fines doubling for repeated violations.