In order to ensure additional revenues in the budget for the coming year, the Ministry of Finance is also discussing the possible remission of penalty interest for declared and unpaid taxes by companies and individuals. The more extreme idea is to find a mechanism to waive the penalty for undeclared income if it is still declared in 2025 and the 10 percent tax due is paid on it. Both ideas fall under the definition of a tax amnesty. The first is more limited, the second much broader. Estimates are that 4.5 billion BGN can possibly be collected in this way, which are currently beyond the scope of the tax administration.
This comments on "Voices" Stefan Antonov.
The difference is that in the first case, the measure is directed only at companies that have declared their obligations in good faith, but cannot pay them due to liquidity difficulties. Here it must be established whether the refusal of the state to collect the penal interest will be a sufficient incentive for the company to wake up and pay the principal. If, and it is very likely that it will not be able to do this, because otherwise it would have done so, (penalty interest adds 10% to the value of the obligation every month) the firm even if a window of opportunity opens up to it, it will still needs liquid support. When commercial banks look for the absence of arrears to the state in order to lend to a business, this will mean that the respective company cannot rely on a bank loan to acquire the necessary liquidity. Unless the Bulgarian Development Bank offers a "credit for paying taxes" as a product. This is technically feasible, but even if the money goes to bona fide companies, the question will still arise – why BBR credits irregular payers.
True, it is not a loan for 150 million that remains unsecured days after its absorption, and four years later turns out to be uncollectible.
The positive effects of the tax amnesty are only in the short term. In the long term, they have negative consequences for society. After years of building a tax policy that requires them to be equal under the law and in fairness, a change is now being considered. The tax amnesty gives an advantage to those who break the law. Penalties lose their effectiveness and in the medium term this leads to an increase in tax crimes.
Tax amnesty has been introduced by the following countries: South Africa, Russia, Philippines, Pakistan, Malaysia, Indonesia, India.
Australia, Germany only allowed in respect of undeclared tax liabilities. Canada – it only removes the fines for a certain period, but not the interest. Norway, France, Italy, Spain offer amnesty only for assets that are owned in so-called offshore areas, but their owners wish to freely use them in the countries where they live.
On September 30, 2010, the Greek parliament ratified legislation pushed by the Greek government in an attempt to raise revenue, granting tax amnesty to millions of Greek citizens by paying only 55 percent of outstanding debts. In 2011, the European Commission asked Greece to change its tax legislation, as its tax amnesty was considered discriminatory and incompatible with the European Union treaties.
It is still not clear how the tax amnesty will be regulated in our country, but from the European countries, it is very similar to the one in Greece in 2010.
When introducing a tax amnesty, several things should be considered:
- The medium and long-term effects described above;
- The legal framework must comply with the requirements of the European Union, so that it does not appear to be discriminatory and incompatible with the treaties of the European Union;
- The efforts we should make to get out of the so-called “grey list” in relation to money laundering. Do we guarantee that with such an amnesty, only clean income will come to light. It is one thing, for example, for all the construction workers and craftsmen who have accumulated savings from their work on sites over the years to take them out of the jars and put them into the banking system. It is quite another for drug dealers to pretend to be masters of plasterboard and faience and to legitimize their criminal income.
Until now, it remains unclear how the Ministry of Finance made its assessment that an amnesty could collect 4.5 billion BGN from the two types of amnesty. The level of overdue tax liabilities (including collectable, partially collectable, difficult to collect and uncollectible) is also not publicly known.
At the moment, the tax amnesty proposal looks more like an attempt to find a source “on paper” to tie the budget to a deficit of 3% of GDP for 2025. Something that no conceivable measure can provide, and therefore a desperate idea is floated that can only remain on paper.