DOCSLIB.ORG

Tackling the Undeclared Economy in Bulgaria

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Tackling the Undeclared Economy in Bulgaria Tackling the Undeclared Economy in Bulgaria A baseline report 2014 Rositsa Dzhekova and Colin C Williams GREY Working Paper No. 1 Sheffield University Management School University of Sheffield 1 | Page Contents List of abbreviations ...................................................................................................................................................................... 3 List of figures ...................................................................................................................................................................................4 List of tables ..................................................................................................................................................................................... 5 Acknowledgements ....................................................................................................................................................................... 5 Executive Summary.......................................................................................................................................................................6 1. Introduction ......................................................................................................................................................................... 10 2. Economic, social and political context ...................................................................................................................... 12 3. Extent of undeclared work in Bulgaria ...................................................................................................................... 13 3.1. Availability of data on the size of undeclared work .................................................................................... 13 3.2. Cross-national studies ........................................................................................................................................... 14 3.3. Indirect measurement approaches.................................................................................................................. 17 Monetary method .............................................................................................................................................................. 17 Electricity consumption method ................................................................................................................................. 18 System of National Accounts ........................................................................................................................................ 19 Tax gap estimates ............................................................................................................................................................. 20 3.4. Direct measurement approaches ..................................................................................................................... 21 Hidden Economy Index ................................................................................................................................................... 23 White Economy Index ..................................................................................................................................................... 26 3.5. Summary .................................................................................................................................................................... 26 4. Nature of the undeclared economy .......................................................................................................................... 27 4.1. Sectorial and business variations..................................................................................................................... 28 4.2. Supply and demand of undeclared work ....................................................................................................... 31 Supply side .......................................................................................................................................................................... 32 Demand side ....................................................................................................................................................................... 37 4.3. Types of undeclared economic activity ......................................................................................................... 40 Overview ............................................................................................................................................................................... 40 Primary work without contract .................................................................................................................................. 42 Undeclared secondary employment ......................................................................................................................... 43 Envelope wages ................................................................................................................................................................. 45 Tax evasion / underreported turnover .................................................................................................................... 48 4.4. Undeclared economy and criminal markets ............................................................................................... 49 Undeclared production and trade in excise goods .............................................................................................. 51 5. Barriers to formalization ............................................................................................................................................... 52 5.1. Business environment barriers ......................................................................................................................... 55 2 | Page 5.2. Tax and regulatory systems ................................................................................................................................ 59 5.3. Labour market barriers ........................................................................................................................................ 61 5.4. Government efficiency, corruption and public trust ............................................................................... 62 5.5. Conclusion................................................................................................................................................................. 63 6. Institutional framework for fighting undeclared work ...................................................................................... 63 6.1. State institutions .................................................................................................................................................... 64 6.2. Role of social partners .......................................................................................................................................... 67 7. Policy approach and measures to tackle undeclared work............................................................................. 69 7.1. Typology of policy approaches .......................................................................................................................... 69 7.2. Overview of the policy approach in Bulgaria ............................................................................................... 69 7.3. Types of measures ................................................................................................................................................. 70 Prevention (deter entry) ................................................................................................................................................ 71 Deterrence measures (pursue and punish) .......................................................................................................... 76 Curative measures ........................................................................................................................................................... 79 Fostering commitment ................................................................................................................................................... 80 7.4. Evaluation of existing policy measures........................................................................................................... 82 References ..................................................................................................................................................................................... 86 List of abbreviations BCCI - Bulgarian Chamber of Commerce and Industry BIA - Bulgarian Industrial Association BICA – Bulgarian Industrial Capital Association BSMEPA – Bulgarian Small and Medium Enterprises Promotion Agency CEIBG - Confederation of Employers and Industrialists in Bulgaria CITUB – Confederation of the Independent Trade Unions in Bulgaria CSD – Center for the Study of Democracy CT Podkrepa – Confederation of Labour “Podkrepa” ESC – Economic and Social Council EVS – European Values Study FTR – Formalization Tax Rate Eurofound – European Foundation for the Improvement of Living and Working Conditions GLI – General Labour Inspectorate ILO – International Labour Organisation IMD – Institute for Management Development IME – Institute for Market Economics LARACEAA – Act on Limiting Administrative
Load more

Recommended publications
  • When Foreign Direct Investment Is Good for Development: Bulgaria’S Accession, Industrial Restructuring and Regional FDI
    Diana Bozhilova When foreign direct investment is good for development: Bulgaria’s accession, industrial restructuring and regional FDI Working paper Original citation: Bozhilova, Diana (2010) When foreign direct investment is good for development: Bulgaria’s accession, industrial restructuring and regional FDI. Hellenic Observatory papers on Greece and Southeast Europe, GreeSE paper no. 33. The Hellenic Observatory, London School of Economics and Political Science, London, UK. This version available at: http://eprints.lse.ac.uk/27673/ Originally available from the Hellenic Observatory Available in LSE Research Online: April 2010 © 2010 Diana Bozhilova LSE has developed LSE Research Online so that users may access research output of the School. Copyright © and Moral Rights for the papers on this site are retained by the individual authors and/or other copyright owners. Users may download and/or print one copy of any article(s) in LSE Research Online to facilitate their private study or for non-commercial research. You may not engage in further distribution of the material or use it for any profit-making activities or any commercial gain. You may freely distribute the URL (http://eprints.lse.ac.uk) of the LSE Research Online website. When Foreign Direct Investment is Good for Development: Bulgaria’s accession, industrial restructuring and regional FDI Diana Bozhilova GreeSE Paper No 333333 Hellenic Observatory Papers on Greece and Southeast Europe March 2010 All views expressed in this paper are those of the authors and do not necessarily represent the views of the Hellenic Observatory or the LSE © Diana Bozhilova _ Table of Contents ABSTRACT _______________________________________________________ iii 1.
    [Show full text]
  • Small State Autonomy in Hierarchical Regimes. the Case of Bulgaria in the German and Soviet Spheres of Influence 1933 – 1956
    Small State Autonomy in Hierarchical Regimes. The Case of Bulgaria in the German and Soviet Spheres of Influence 1933 – 1956 By Vera Asenova Submitted to Central European University Doctoral School of Political Science, Public Policy and International Relations In partial fulfillment of the requirements for the degree of Doctor of Philosophy Supervisor: Prof. Julius Horváth Budapest, Hungary November 2013 Statement I hereby state that the thesis contains no materials accepted for any other degrees in any other institutions. The thesis contains no materials previously written and/or published by another person, except where appropriate acknowledgement is made in the form of bibliographical reference. Vera Asenova ………………... ii Abstract This thesis studies international cooperation between a small and a big state in the framework of administered international trade regimes. It discusses the short-term economic goals and long-term institutional effects of international rules on domestic politics of small states. A central concept is the concept of authority in hierarchical relations as defined by Lake, 2009. Authority is granted by the small state in the course of interaction with the hegemonic state, but authority is also utilized by the latter in order to attract small partners and to create positive expectations from cooperation. The main research question is how do small states trade their own authority for economic gains in relations with foreign governments and with local actors. This question is about the relationship between international and domestic hierarchies and the structural continuities that result from international cooperation. The contested relationship between foreign authority and domestic institutions is examined through the experience of Bulgaria under two different international trade regimes – the German economic sphere in the 1930’s and the Council for Mutual Economic Assistance (CMEA) in the early 1950’s.
    [Show full text]
  • POINT Review of Industrial Transition of Bulgaria
    POINT Review of Industrial Transition of Bulgaria Harnessing digitalisation to link and strengthen the ICT and mechatronics sectors Ruslan Stefanov Patries Boekholt Dimitrios Pontikakis 2021 EUR 30643 EN This publication is a Science for Policy report by the Joint Research Centre (JRC), the Eouropean Commission’s science and knowledge service. It aims to provide evidence-based scientific support to the European policymaking process. The scientific output expressed does not imply a policy position of the European Commission. Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use that might be made of this publication. For information on the methodology and quality underlying the data used in this publication for which the source is neither Eurostat nor other Commission services, users should contact the referenced source. The designations employed and the presentation of material on the maps do not imply the expression of any opinion whatsoever on the part of the European Union concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. Contact information Name: Dimitrios Pontikakis Email: [email protected] EU Science Hub https://ec.europa.eu/jrc JRC123901 EUR 30643 EN PDF ISBN 978-92-76-32322-8 ISSN 1831-9424 doi:10.2760/241737 Luxembourg: Publications Office of the European Union, 2021 © European Union, 2021 The reuse policy of the European Commission is implemented by the Commission Decision 2011/833/EU of 12 December 2011 on the reuse of Commission documents (OJ L 330, 14.12.2011, p.
    [Show full text]
  • PDF Download
    22 June 2018 ISSN: 2560-1628 2018 No.24 WORKING PAPER Bulgarian-Chinese economic relations in the context of 16+1 Cooperation Paskal ZHELEV Kiadó: Kína-KKE Intézet Nonprofit Kft. Szerkesztésért felelős személy: Chen Xin Kiadásért felelős személy: Huang Ping 1052 Budapest Petőfi Sándor utca 11. +36 1 5858 690 [email protected] china-cee.eu Bulgarian-Chinese economic relations in the context of 16+1 Cooperation Abstract The aim of this paper is to look at the dynamics during the last decade and the current state of Bulgaria’s foreign economic relations with China. A special focus is put on trade relations. Various trade indicators are employed including trade complementarity, intra- industry trade, revealed comparative advantage indices in order to evaluate the current status and identify potential areas for intensification of Bulgaria’s business ties with China. The findings of the paper can be used to draw policy implications for promoting future trade and investment cooperation between Bulgaria and China. Keywords: foreign trade, FDI, Bulgaria, China 1. Introduction Bulgaria has long lasting relations with China dating back to 1949. It is the second country in the world only after the USSR that officially recognized the People’s Republic of China. In the 1950s the bilateral ties were flourishing. However during the Cultural Revolution in China (1966-1976) and the rising ideological disagreements with the USSR, the Sino-Bulgarian relations halted to a zero.1 In the beginning of the 1980s the cooperation between Bulgaria and China was restored and, with the exception of the early 1990s when both countries had different internal issues to deal with, ever since then they have been on an upward path.
    [Show full text]
  • Doing Business in Bulgaria
    Doing business in Bulgaria Learn how EY can help you navigate through Bulgaria 2019 01 Introduction 02 Bulgaria at a glance 03 Country profile: general information, geography, demographics 04 Business landscape: economy, financial system, key sectors, reasons to invest, foreign trade 10 Business incentives 12 Tax incentives 12 Non-tax incentives 13 EU funding opportunities 14 Tax guide 16 Personal taxation 17 Income tax 19 Immigration 21 Property taxes 22 Corporate income tax 25 Indirect taxes 30 Legal guide 32 Establishing business presence 32 Business entities 33 Acquisition of property 33 Regulatory compliance 33 Banking 34 Intellectual and industry property 34 E-business 34 Competition & Consumer protection 34 Data privacy 35 Labor 36 Accounting and financial reporting. Audit. 48 EY Bulgaria Dear reader, hank you for taking the time to get acquainted with this guide containing a comprehensive tax and legal analysis of the business environment in T Bulgaria. We have tried to touch upon the various questions that you as an investor might have when trying to find the best destination for your next business endeavour. Of course, you need to be aware that the economic, tax and legal landscapes change with time and there are a number of details within your specific industry sector and company business model that need to be observed. In the last 27 years, Bulgaria has made considerable progress in terms of economic and political reforms. Today, in 2019, the country enjoys stable economy, political landscape and financial system. According to the World Bank, the Bulgarian economy will grow by 3.1% in 2019 in line with the forecasted 2.9% GDP growth of the global economy.
    [Show full text]
  • Competitiveness and Ease of Doing Business in Bulgaria and EU Maria
    Competitiveness and Ease of Doing Business in Bulgaria and EU Maria Papanikolaou March 2014 International Hellenic University ABSTRACT The present dissertation titled as “The economic performance and development of Bulgaria in terms of competitiveness (GCI) and easy of doing business (EDB) in comparison with European Union and the countries of Black Sea region” was worked out in the frames of the curriculum of postgraduate studies as a part of the “MA program in Black Sea Cultural Studies”, in the School of Humanities, of the International Hellenic University during the academic year 2010-2011. The Master's dissertation aims to apply a certain methodology and approach in the analysis of the economic development of Bulgaria and to demonstrate reasonably original research. More analytically, the master thesis conducts a thorough comparative method, through a series of annual reports, by using two specific financial indexes; the Global Competitiveness Index (GCI) of the World Economic Forum for the period 2004-2011, and the Easy of Doing Business Index of the World Bank for the period 2006-2011, in order to evaluate economic performance of Bulgaria –as it is strongly affected by various special circumstances such as the worldwide Financial Crisis 2007 till now– in comparison with the performance of the European Union (EU27) and the group of Black Sea countries (BS10), in specific areas of economic interest. In the end, total evaluation and assessment of undertaking takes place, with consecutive report of helpful conclusions. It must be noted, that the hall comparative analysis of the economic performance and development of Bulgaria in terms of competitiveness (GCI) and easy of doing business (EDB) in comparison with European Union and the countries of Black Sea region necessitated the construction of a series of tables and charts where the best and the worst values are remarked.
    [Show full text]
  • Bulgaria Country Strategy 2019-2022
    BLACK SEA TRADE AND DEVELOPMENT BANK BULGARIA Country Strategy 2019‐2022 TABLE OF CONTENTS I. Recent Economic Developments and Outlook a. Economic structure and Demographic trends b. Performance 2015-2018 i- Real Sector ii- Public Sector and Fiscal Policy iii- Monetary and Financial Sector iv- External Sector c. Forecast for 2019–2022 II. Overview of BSTDB Portfolio III. Review of Country Strategy IV. Priorities TABLES: Table 1: Basic Macroeconomic Indicators at a Glance Table 2: Current BSTDB Portfolio - BoD Approved Operations Table 3: BSTDB Country Strategy Performance (2015-2018) 2 BoD Decision No: 19‐068‐BD2019‐143 Table 1: Basic Macroeconomic Indicators at a Glance for BULGARIA Key Long Term Foreign Currency Sovereign Risk Rating at 1 October, 2019: Moody’s: Baa2 positive| S&P: BBB- positive outlook | Fitch: BBB INDICATOR 2015 2016 2017 2018 Est. 2019 Proj. 2020 Proj. 2021 Proj. 2022 1Population (Million) 7.18 7.13 7.08 7.04 6.99 6.94 6.89 6.84 694 2Avg Exch. Rate (BGN/ USD) 1.76 1.77 1.74 1.66 1.74 1.71 1.65 1.60 3Inflation (CPI Avg.) -0.1% -0.8% 2.1% 2.8% 2.9% 2.6% 2.7% 2.9% 4Average monthly wages (US$) 497.62 536.19 597.54 684.96 n.a. n.a. n.a. n.a. 5GDP (BGNbillion) current prices 88,575.17 94,130.00 101,042.53 107,925.31 116,196.60 120,963.70 127,159.40 133,455.30 6GDP US$ billion 50.20 53.24 58.22 65.13 66.66 70.82 77.07 83.57 7GDP per capita (current US$) 6,993.75 7,469.28 8,228.27 9,271.33 9,538.52 10,203.41 11,181.99 12,210.15 8Real GDP growth, % 3.5% 3.9% 3.8% 3.1% 3.2% 2.8% 3.1% 2.6% Official Unemployment (ILO, annual 9 9.2% 7.6% 6.2% 5.2% 4.5% 4.6% 4.4% n.a.
    [Show full text]
  • United Bulgarian Bank Bulgaria: Macroeconomic Update May 2021
    United Bulgarian Bank Bulgaria: Macroeconomic Update May 2021 Chief Economist Department Probabilities of the Main Scenarios Bulgaria Outlook 2020-2023 The Economy of Bulgaria COVID - 19 Status in Bulgaria Bulgaria’s Main Macroeconomic Indicators Selected Countries Bond Markets Brief Review Banking sector 2 Probability of the Main Scenarios Baseline scenario increasingly confirmed by recent events –the strong progress in vaccination in EU and the expected improvement of the vaccination in Bulgaria New APC 2020 Scenarios July-August probabilities 15% 45% 40% • SCENARIO • PESSIMISTICSeptember probabilities 15% 50% 35% October probabilities 10% 55% 35% November probabilities 10% 55% 35% December probabilities 10% 55% 35% Year 2021 January probabilities 10% 60% 30% February probabilities 10% 60% 30% March probabilities 10% 60% 30% April probabilities 10% 60% 30% Мay probabilities 10% 70% 20% Source: KBC Economics 3 Arguments for Scenario Probabilities – May 2021 • The baseline scenario for May 2021 takes into account the latest economic and financial developments, as well as the latest information on the efficacy of the vaccine and progress in the introduction of vaccines. • The baseline scenario involves reducing uncertainty about when to emerge from the pandemic. As the latest wave of pandemics declines across the EU and the rate of vaccination increases, the baseline scenario is expected to gradually open up the EU's economies in the second half of 2021 onwards. Based on recent events confirming this scenario, the probability of a baseline scenario has been changed to 70%, while the probability of a pessimistic scenario has been reduced to 20%, reflecting the declining risks of complete collapse and / or permanent and comprehensive blockages as expected.
    [Show full text]
  • Bulgaria's Accession in the Context of the European Union Enlargement
    University of Twente University of Münster PO Box 217 Scharnhorststr. 100 7500 AE Enschede 48145 Münster The Netherlands Germany Bulgaria’s Accession in the Context of the European Union Enlargement Master thesis submitted for the degree Master of Science in European Studies Double diploma master program at The University of Twente, The Netherlands The University of Münster, Germany 1st Supervisor: Prof. Dr. Nico S. Groenendijk (University of Twente) 2nd Supervisor: Dr. Victor Rodriguez (University of Twente) Student: Bistra Velichkova Student number: s1042483 (UT) Matrikelnummer: 370013 (WWU Münster) Enschede, October 5th, 2011 1 ACKNOWLEDGMENTS This thesis would not have been possible without the help and support of Prof. Dr. Nico S. Groenendijk. That is why, I would like to express my sincere gratitude to him for his useful advices, regular feedbacks, recommendations and general guidance through the process of writing the thesis. I would like also to thank Prof. Groenendijk for the exciting classes of the course “European institutions” conducted by him. Also, I would like to thank him for the unforgettable and professionally enriching trip to the European institutions, in the end of the semester. I further extend my gratitude to Dr. Victor Rodriguez for his time for reading my thesis and helping me with suggestions and recommendations for improving the research and the final results. I owe my deepest gratitude to my brother who supported me in any respects during my studying and during the completion of the final thesis. I am heartily thankful also to my parents and grandmother for being always there for me, for their moral help which motivated me during my work! Bistra Velichkova 2 ABSTRACT The thesis discusses the accession of the country of Bulgaria into the European Union (EU) in the context of the EU's enlargement from year 2007.
    [Show full text]
  • July 2019 MONITORING PROGRESS in NATIONAL INITIATIVES ON
    MONITORING PROGRESS IN NATIONAL INITIATIVES ON DIGITISING INDUSTRY Country report Bulgaria July 2019 1 Table of contents 1 General context .................................................................................................................. 7 1.1 Economic context and status on digitisation ............................................................... 7 1.2 National strategy on digitising industry ..................................................................... 10 1.3 EU cooperation in the field of digitising industry initiatives ........................................ 15 2 Other policy support to digitising industry .......................................................................... 16 2.1 Boosting innovation capacity .................................................................................... 16 2.2 Regulatory framework for digital age ........................................................................ 20 2.3 Skills development ................................................................................................... 22 2.4 Support mechanisms ............................................................................................... 26 3 Conclusions ...................................................................................................................... 26 ANNEX 1 List of stakeholders interviewed............................................................................ 31 ENDNOTES ...........................................................................................................................
    [Show full text]
  • Structural Differences Between the Economy of Bulgaria and the Economics of Part of the Members of the European Union
    Trakia Journal of Sciences, No 2, pp 165-171, 2019 Copyright © 2019 Trakia University Available online at: http://www.uni-sz.bg ISSN 1313-7069 (print) ISSN 1313-3551 (online) doi:10.15547/tjs.2019.02.010 Original Contribution STRUCTURAL DIFFERENCES BETWEEN THE ECONOMY OF BULGARIA AND THE ECONOMICS OF PART OF THE MEMBERS OF THE EUROPEAN UNION S. Kalinkova* Department “Marketing and Strategic Planning”, University of National and World Economy – Sofia, Bulgaria ABSTRACT The development of Bulgaria's economic system is often associated with the perception of the idea for “catch up development”. Such a concept could not be implemented successfully if there is no information about what this economic system should aim for. For this reason, the main purpose of the study is to outline the structural differences between the economy of Bulgaria and some of the countries of the European Union. In the study it is used the method of the coefficient of structural differences, which is developed by Kiril Gatev. The main research tasks to be considered in the study are: revealing the essence of the coefficient of structural differences and the information that it provides; to assess the degree of "proximity" between Bulgaria and the surveyed countries using the coefficient of structural differences and last but not least, on the basis of the assessments received, to draw conclusions. As a result of the study there will be information about the development of the Bulgarian economy, measured by the elements of the vector of the final consumption, compared to some of the European countries with similar characteristics.
    [Show full text]
  • Was Gerschenkron Right? Bulgarian Agricultural Growth During the Interwar Period in Light of Modern Development Economics
    European Historical Economics Society ! EHES!WORKING!PAPERS!IN!ECONOMIC!HISTORY!!|!!!NO.!82! Was Gerschenkron right? Bulgarian agricultural growth during the Interwar period in light of modern development economics Michael Kopsidis Leibniz Institute of Agricultural Development in Transition Economies (Halle / Germany) Martin Ivanov Department of Philosophy, Sofia University JULY!2015! ! EHES!Working!Paper!|!No.!82!|!July!2015! Was Gerschenkron right? Bulgarian agricultural growth during the Interwar period in light of modern development economics Michael Kopsidis* Leibniz Institute of Agricultural Development in Transition Economies (Halle / Germany) Martin Ivanov** Department of Philosophy, Sofia University Abstract ! The classical view of Bulgaria’s failed industrialization prior to the Second World War was established by Alexander Gerschenkron. According to his interpretation, an inherently backward small peasant agriculture and well-organized peasantry not only retarded growth in agriculture but obstructed any possible industrialization strategy. Following Hayami and Ruttan, we utilize the decomposition of farm labor productivity into land productivity, and land-to-man ratio to analyze the sources of growth in Bulgaria’s agriculture 1887-1939. Our results show that Bulgaria’s peasants did cross the threshold to modern growth during the Interwar period. Rich qualitative evidence supports the findings of our quantitative analysis that contrary to Gerschenkron’s view and conventional wisdom, Bulgaria’s peasants substantially contributed to the modernization of Bulgaria’s economy and society. We interpret our results in light of modern development economics, and conclude that agriculture formed no impediment to Bulgaria’s industrialization. The reasons that a ‘large industrial spurt’ did not occur in Bulgaria until 1945 are not to be found in the agricultural sector.
    [Show full text]