Things were cooking in the nightclubs of Varna on a hot August night, when tax inspectors arrived to check whether the books were being cooked as well.

It was the latest in a series of unannounced inspections by the National Revenue Agency (NRA) to detect enterprises that were failing to declare taxes owing. NRA head Krassimir Stefanov was on the scene in the early hours, drawing curious glances from passing clubbers as he told the television cameras that checks along the Black Sea coast in the two weeks leading up to August 14, inspectors had uncovered 1.5 million leva in undeclared turnover, including 300 000 leva in unpaid value added tax.

The Varna inspection turned up one night club that, on reconsideration, declared its turnover to be 14-fold higher than it had previously said. However, this was outdone by a disco on the southern Black Sea coast that supposedly had no income at all.

Clubs along Bulgaria’s northern Black Sea coast were more financially disciplined than their southern coast counterparts, Dnevnik reported Stefanov as saying.

Stefanov said that the most common breaches that had been uncovered by the inspections included failure to issue receipts, attempts at evading paying VAT, failure to report real turnover as well as not paying social security contributions for employees.

He said that ownerships of discos were changed each year to evade payment of outstanding debt.

In one case, a company based on the northern Black Sea coast had a daily turnover of about 20 000 leva, but had not yet paid arrear taxes of 100 000 leva to the NRA. The company operated a disco and a tourist site, and in spite of its turnover, had not paid taxes to the NRA for two years. After the inspection, the company owner had promised to pay all outstanding debts to the agency.

Stefanov said that in September, the NRA would examine and compare clubs’ turnover month-by-month, to establish whether the correct amounts of tax had been paid.

The inspections along Bulgaria’s Black Sea coast would continue until the end of August, he said.

 

Inland revenue

 

The surprise checks on Black Sea establishments may have made entertaining headlines, but recent statements in Sofia by Stefanov made it clear that the NRA still has its work cut out for it, and has some further steps on its agenda – including on the legislative front.

Apart from inspections, the agency has sought to weed out some of its problem staff. Stefanov told journalists on August 16 that 50 NRA staff had been dismissed in the past six months because they were suspected of involvement in corruption (Stefanov himself was promoted to his current job when his predecessor as the head of the agency was dismissed for alleged wrongdoing).

Stefanov said that in the case of the officers who had been dismissed, "these were only suspicions and they have to be proved in court. However, we find that the facts available are sufficient to judge that these officers were involved in corruption".

As reported by local website Focus, Stefanov said that check-ups into NRA staff would continue, and more dismissals because of suspected corruption should be expected before the end of 2010.

Speaking to financial daily Pari on August 10, Stefanov said that about a half a billion leva in social insurance contributions were effectively uncollectible. These contributions had built up over the past 10 years, and scams had been used to avoid paying them.

Separately, he told Bulgarian National Radio in an August 12 interview that it was essential for proposed amendments to tax and lending institutions laws, respectively, be approved to allow NRA staff to have full access to the credit records of companies that had applied for business loans.

Stefanov said that during the pre-crisis lending boom, loans had been secured by companies telling banks their real incomes – numbers different from those that they had declared on their tax returns. He said that there were scores of cases of companies that, officially, made no profits but banks had been prepared to lend them hundreds of thousands of euro.

Prime Minister Boiko Borissov had pledged that, at its first meeting after its summer recess, the Cabinet would approve the amendments requested by the NRA.