Bulgaria’s grey economy in 2013

published on 11/22/13 11:20 AM

Photo: BGNES

The share of the grey economy among the business and the population in Bulgaria has increased in 2013, shows the annual report of the Center for the Study of Democracy. Poverty, the crisis on the labor market and the economic stagnation create favorable conditions for the development of grey economy. These factors are supplemented by the change of the Bulgarian government and the political turbulence in the country. Meanwhile, the share of this type of economy in the gross domestic product has been decreasing over the past ten years .

Grey economy will cost some EUR 126 million in 2013, data of the Center for the Study of Democracy shows. These are loses stemming from hidden social and health contributions due to undeclared incomes, etc. Data of this analysis also shows that nearly 14% of the working people in Bulgaria have received more money than the officially declared. Here is an example: An office employee signs under EUR 500 a month. The worker and his employer pay monthly contributions based on the abovementioned sum. The real salary paid by the employer, however, is twice bigger-EUR 1,000. Thus, no taxes are paid over the difference of EUR 500.

The other problem in Bulgaria is linked with VAT frauds. According to data of the European Commission, the losses which incur from tax frauds amount to EUR 600 million. However, the National Revenue Agency claims that this problem is not that serious. Unemployment has reached nearly 13% and the low productivity and low wages contribute to the development of the grey economy. According to Professor Ivan Angelov from the Institute of Economics at the Bulgarian Academy of Sciences, the real unemployment in this country amounts to nearly 20%. Grey economy continues to hinder the economic development of Bulgaria. According to various estimates, some EUR 740 million is lost per year due to concealed value added tax and social contributions. “No decline of the grey economy was registered in the five years following the accession of this country to the EU”, comments Ruslan Stefanov from the Center for the Study of Democracy. The public procurement orders in Bulgaria are among the factors which generate corruption.

“The Bulgarian politicians love the mega projects, as they provide the best opportunities for frauds and corruption worldwide”, says Ruslan Stefanov. “When the institutions which counteract to these processes are weak, there is a higher risk of increase of all grey and undeclared payments.”

The weakness of the Bulgarian economy stems from the strong oligarchic structures and informal social and economic systems, which promote illegal activities in all sectors. The issue regarding the offshore companies and the secret bank accounts of Bulgarian politicians in foreign banks became topical recently. “Bank account in foreign banks usually means hidden incomes or corrupt payments made in the past”, says Ruslan Stefanov.

“The capacity of the Bulgarian authorities to reveal money laundering cases is very low”, says Ruslan Stefanov. “We have a fresh political case-the one of former Deputy Chairman of the National Assembly Hristo Biserov. The signals came from foreign services. Why political acts always outrun the acts of the Bulgarian authorities? This is indicative of the way information is passed along. In other countries the local media and the politicians always learn such news after the investigating authorities. If there are problems regarding the execution of law at the high political level, we can not expect the authorities to act adequately towards cases related to ordinary citizens and taxpayers. People see that serious malpractices among the political elite are not pursued”, concludes Ruslan Stefanov.

“These effects discourage people who stay away form the grey economy”, comments Professor Ivan Angelov, reminding the proverb: “Law is a gate in the field”. The question is who passes through the gate and who goes round it.

English version: Kostadin Atanasov

По публикацията работи: Tania Harizanova

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Bulgaria’s grey economy in 2013

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