site.btaShadow Economy in Bulgaria Estimated at 17.1% of GDP

Shadow Economy in Bulgaria Estimated at  17.1% of GDP

Sofia, November 9 (BTA) - The shadow economy in Bulgaria in 2014
 made up 17.1 per cent of the GDP, according to a study done by
Erns & Young and ordered and made public Monday by MasterCard.
Transitioning to non-cash payment is in the best interest of the
 governments facing this problem, says an analysis based on the
study.

The study analyzes both the passive and the active side of
shadow economy. In the first, the buyer duly pays the asked
price but the seller fails to register the transaction and thus
avoids taxes. The only winning side is the seller and the buyer
may even be unaware that he or she contributes to the shadow
economy. In the active situations, both sides fail to register
the transaction (which is what happens if the buyer is asked a
lower price if he agrees not to be invoiced by the seller).

Unlike the passive component, the active component is not
influenced by encouraging electronic payments as both sides will
 continue to use cash. It means that the problem with the active
 shadow economy should be addressed with other instruments of
the government.

The sector with the largest passive shadow economy in Bulgaria,
some 43 per cent, is the production of foods, beverages and
tobacco products. The passive component makes up 10.4 per cent
of the GDP which adds up to 1.8 million leva in evaded corporate
 income tax and VAT.

To reduce the passive shadow economy, Bulgaria could put in
place a catalogue of measures, including some encouraging the
use of electronic payment for purchases. One is the cashback
option, which has the potential of reducing the shadow economy
by 2.8 per cent of GDP and increasing the net budget revenue by
220 million leva. Another tool is setting a limit on cash
payments for purchases. A threashold of 20 leva, for example,
should cause the shadow economy to contract by 3.7 per cent of
GDP, the analysis says.

The analysis covers eight countries of Central and Southeastern
Europe: Bosnia and Hercegovina, Bulgaria, Croatia, the Czech
Republic, Poland, Serbia, Slovakia and Slovenia.