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Bulgaria Looks to Smuggling Combat to Patch up State Budget

Bulgaria’s new finance minister has pledged reforms to stop smuggling in a bid to patch up the state budget, which is in worse shape than described by the ousted administration.

“We are aiming for a balanced budget. To do that, we need about EUR 2.5 B either in extra revenue by stopping smuggling or in spending cuts,” Minister Simeon Djankov said in the Danube town of Russe on Friday.

The cabinet plans to cut 15% of all administrative costs starting next week to help save BGN 1.2 B this year. Plugging loopholes in excise tax collection and curbing contraband would help cover part of the remaining BGN 1.3 B, he said.

Earlier in the week Djankov, a former World Bank chief economist, took over personally the control of the revenues units in his department – the customs and tax services. The nationwide tour that he started in the town of Russe is part this commitment.

Djankov made it clear that his predecessors have benefited from smuggling by offering a political protection of the criminals.

“There were even days when the border barriers were thrown up for trucks with smuggled goods to come in,” Djankov said.

Estimates set losses from uncollected excise duties and fees at about BGN 1,2 B, which nearly equals the current deficit in the budget of about BGN 1,3 B.

Asked about a possible reduction in Value Added Tax (VAT), the minister said it can be lowered no earlier than in 2012.

“It is impossible to lower the tax in 2010 or 2011 since this is when we expect Bulgaria to start its recovery from the financial crisis,” Djankov said. “But once this happens, it will be a good idea.”

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