Bulgaria lost 700 million leva from VAT drainage connected to residential property deals, head of Bulgarian Industrial Association (BIA) Bozhidar Danev said.

Danev took part in a conference on dealing with grey economy in the country.

Real estate prices have increased 2.64 times within the past five years, which is a 21.4 per cent annual growth, Danev said. According to official data the increase is 13 times lower.

A large amount of undeclared capital is being accumulated during the entire process of accomplishing property deals starting from construction to the sale of the property. The payments turn out to be made at the value estimated by tax inspectors rather than the real market price of the property, Danev said.

Another major problem is income diversion, Danev said.

Consumer credits currently amount to 9.5 billion leva. Having in mind the income declared by Bulgarians, the figures would mean that they could not afford to pay their loans. At the same time everyone manages to pay off debts, an indication of hidden income.