Bulgaria Tops EU by Shadow Economy - Study

According to recent research, the lowest share of shadow economy is observed in the production of machinery and in postal services – about 10% to 12%. File photo

The shadow economy in Bulgaria and Romania is at the highest level in the European Union, over 30%, according to a recent study.

The study was conducted by the Bulgarian National Center Business to the Rules, working for Restriction and Prevention of Informal Economy.

According to data of the European Commission, the average shadow economy in the EU is between 15% - 17%, ranging from 10% - 12% in Germany and Denmark to nearly 30% from the Gross Domestic Product, GDP, in Greece and Italy.

The shadow economy in Bulgaria is down in 2011, but only where goods are sold, while it remains very high in the service sector.

The sectors with the largest share of shadow economy in Bulgaria are construction, tourism and health care where it sometimes reaches 50%-60% when services are offered.

The experts from the center point out that in the health care sector, the shadow economy takes the form of corruption.

The lowest share of shadow economy is observed in the production of machinery and in postal services – about 10% to 12%.

Tax evasion and concealment of income are rare in big, particularly foreign, companies and involve mainly sectors where there is end consumption by individuals.

In reality, the index shows the percentage of the legally produced GDP in the country. Experts note that almost all of its components are improving. A more negative trend is observed in the collection of Value Added Tax, VAT, and trade with other countries in the EU.

The study further reveals problems with public tender bids – not so much with the offering of bribes, but when formulating the criteria for the competition to determine the winning bidder.

In 2011, there is a significant improvement in the collection of excise duty on alcoholic beverages and cigarettes. The improvement is attributed to the mandate to connect electronically cash registers with the National Revenue Agency, NRA, along with checks from the Employment Agency for fake labor contracts and public pressure against the practice to conceal revenues.

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