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Lukoil will have to provide guarantees of up to BGN 300 million, instead of the current BGN 30 million.
The company may be without a license
An increase in fuel prices will be the real effect of the new proposed requirements for tax deposits, which have been introduced in Parliament with amendments to the Health Law.
This is stated in an opinion of the Bulgarian Chamber of Commerce (BIA), which was presented to the parliamentary legal committee. Increasing fuel prices will affect all goods and services and will ultimately slow economic recovery, according to BIA. The amendments to the Health Law will be discussed today in second reading by the Committee on Legal Affairs.
What is exactly the problem? The & 18 and & 19 of the transitional and final provisions of the amendments to the Health Law presented to Parliament are not related in any way to human health, but are specifically related to the tax warehouse of Lukoil-Bulgaria, an oil pipeline from Burgas to Sofia and related to bases to Iliyantsi, Ihtiman, Vetren, Plovdiv, Stara Zagora and Karnobat. The tax warehouse will be divided into several different tax deposits, one or more of which would be the pipe itself. This will require the issuance of more bank guarantees to guarantee government accounts receivable. In view of the volumes of fuels that pass through the pipeline, each guarantee will have to be for a maximum amount of BGN 30 million, instead of a bank guarantee of BGN 30 million, as is currently the case. After the separation, there will be at least seven guarantees, but there may be more, as the bill is unclear, a statement by Lukoil-Bulgaria, which was presented to the legal commission, reads.
The smallest amount of guarantee will be BGN 210 million and, according to another interpretation of customs, could be up to BGN 300 million. There is hardly a bank that can provide such a guarantee. This means that a time-consuming solution is likely to be required at the banking group level. The most paradoxical thing is that these guarantees will be granted at least seven times for the same fuel, which starts in Bourgas and reaches Sofia. Every action that had to be done once will have to be done seven, if not more than once. The new tax warehouses will require more control devices, at the entrance and exit of the pipeline to each one of the bases along it. These are very serious additional costs. Each of the tax warehouses must have its own automated reporting system, which must be paid for, developed and implemented separately.
The proposed changes also contradict European directives. The “tax warehouse” under Community law is “a place where products subject to excise duty are produced, processed, retained, received or dispatched under a tax suspension agreement by a licensed warehouseman.” From this definition, it is clear that the tax warehouse is always a place. No matter how we interpret the normative act, we cannot say that an F300 metal tube with a length of almost 350 km, that crosses various terrain properties, is a “place”.
And the effect on the treasury of the changes will be zero. Lukoil’s numerous audits and inspections since 2006, when the company received a tax deposit license, have never found any violations. That inspection was completed on May 5, 2020 at all company bases with a finding by the Customs Agency that there are no violations. For the past 14 years since 2006, Lukoil-Bulgaria has contributed to the state budget to eliminate just BGN 10 trillion.
The bill also provides a very short period of one month to send notifications of changes to the license already issued, to separate the pipeline into a separate tax warehouse, and to issue various new and separate licenses. This period is extremely short, but if Lukoil does not submit an application, the current license will be canceled and the company will have to cancel its activities. Furthermore, if all new requirements are not met before November 30, this will lead to the termination of the Lukoil-Bulgaria license again.
Several companies can cease operations
BGN 1 million for cameras in a tax warehouse
Turnover decreased by 50-70%
The costs to equip a medium-sized tax warehouse with video surveillance cameras can reach BGN 1 million. This is stated in the opinion of the Bulgarian Oil and Gas Association (BPGA) on the amendments to the Health Law submitted to Parliament. The opinion was sent to the parliament’s legal committee, which will consider changes to today’s Health Law.
The changes shorten the deadlines for the entry into force of video surveillance in tax warehouses at a time of serious economic difficulties for the industry and a decrease in billing by 50-70%. This would be an unnecessary investment, without clear estimates of what will improve tax collection in the state budget, the industry believes.
The deadlines to comply with the requirements are extremely short and, in practice, at some point it may turn out that a large part of the warehouses will not be able to meet the conditions and will have to stop their activity. And each cost affects the price of fuel paid by end users.
BPGA is not against the introduction of video surveillance in tax warehouses. But this must be done after a discussion with the industry. And not with surprising changes in the Health Law, which regulates our exit from the state of emergency in relation to the coronavirus.
20% decrease
Many texts are not clear
60 companies are affected
The deadline for the introduction of video surveillance in tax warehouses is shortened by more than three months with the changes proposed in the Health Law, according to an opinion of the National Chamber of Vine and Wine (NLVK). The change will affect more than 60 companies: the owners of special warehouses in the liquor and wine production and storage sector. This is expected to happen in a period when industry sales revenue decreased by 20-25% due to COVID-19. Hotels don’t really work, and the activity of restaurants and bars is very limited.
The amendments to the Regulations for the implementation of the Law on Excise Taxes and Tax Deposits have been published for public debate, in which requirements have been established for video surveillance systems. However, the texts have extremely vague wording from the point of view of their practical application, according to NLVK.
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