After appealing to the European Commission regarding the tax measures taken by Greece that would inflict severe damage on Bulgaria, just one day later, Finance Minister Vladislav Goranov stated he was expecting an answer to the appeal, adding that just as the European Commission had laid claim to Sofia to observe European legislation, so it should do the same with regard to Athens so Bulgaria would not find itself in a position of disadvantage. The attention Sofia has been giving to Athens’ plans to introduce a 26 percent tax on deals between Greek and Bulgarian companies, is a sign that it is very worried and with very good reason.

In fact the Greek government is introducing e preventive tax of 26 percent on deals with companies from countries, where profit tax is at least 50 percent lower than in Greece (in Greece it is 26 and in Bulgaria – 10 percent). This tax measure would affect Bulgaria, Ireland and Cyprus. The money would be held back for a period of three months for all contracting parties and would only be made available if proof is provided that the purpose of the deals is not tax evasion.

The Bulgarian side has calculated that the measure would bring its trade with Greece down by more than 20 percent, a fact that causes much concern - after all trade between the two countries exceeds EUR 3 billion. According to Sofia’s official remonstration to the European Commission, the measure is also a violation of the double taxation treaty between Greece and Bulgaria. To top it all, such a tax would be based on the presumption that most deals between companies from the two countries in fact aim to evade taxes.

The measure would be particularly pernicious for companies importing goods from Greece registered in Bulgaria, whether they have any Greek stake or are 100 percent Bulgarian. Greek firms importing commodities from Bulgaria also stand to lose, as do carriers involved in the trade between the two countries. Greek-owned banks in Bulgaria will also be affected because their transfers to the respective bank owners in Greece would be levied a 26 percent preventive tax.

The tax measure planned by Athens elicited a negative reaction from Bulgarian businesses. The Made in Bulgaria - SME Union cautioned that the reimbursement of the 26 percent tax within three months is obviously unrealistic because of the financial state Greece is in. The Union states further that what this measure actually spells is an interdiction on business that would halt Bulgarian exports to Greece and issued a declaration demanding that the Bulgarian administration come up with the respective measures. The Bulgarian Chamber of Commerce chimed in with its own negative reaction.

The Bulgarian administration has not taken any retaliation steps as yet, nor is it working on such measures, but Prime Minister Boyko Borissov has already had to deny allegations that he had given Greece’s PM warning such measures would follow. Though it is not in place yet, as work on the provisions for its implementation continues, the measure has been stirring up trouble in the otherwise good trade relations between Bulgaria and Greece. And it is only logical to expect the same reaction from Ireland and from Cyprus. It would be interesting to see when and how the European Commission will react.

English version: Milena Daynova