Bulgaria mulls a simplified VAT system to boost local fruits and vegetables

However the VAT will be paid by the retailers. [Shutterstock]

The Bulgarian government is planning to boost production of local fruits and vegetable by introducing a new simplified VAT system, local media have quoted the Deputy Minister of Agriculture, Chavdar Marinov, as saying.

Bulgaria has a flat VAT rate of 20% and for many, it’s considered the “sacred cow” for the country’s economy and budget revenues. But the country struggles to fight the competition of neighbouring countries, which offer fruits and vegetables at prices lower than the local products.

Marinov told Nova TV that the idea is to exempt the producers from VAT, which would be paid only by the retailers.

“The invoice won’t have this 20% and the farmers will be able to reinvest the money, for example in seeds, preparations. The last in the chain will pay VAT,” Marinov said, referring to the retailers.

Novinite.com reported that a similar scheme is already being applied successfully in Bulgaria for grain producers. Marinov added that processing companies will also benefit from the new scheme and will not pay VAT for the raw material.

Marinov explained that Bulgarian vegetable producers find themselves in a difficult position as they cannot compete with the prices of fruits and vegetables exported by neighbouring countries such as Greece.

It is common to see Greek fruits and vegetables being less expensive than the Bulgarian produce, which irritates Bulgarian consumers. In Bulgarian supermarkets, the origin of fruits and vegetables is usually indicated, and it’s easy to see that imported products are cheaper.

For Marinov, this should primarily be attributed to the fragmented cooperatives sector in his country compared to the wider neighbourhood, but also to the too many “middlemen” in the food chain, which increases the ultimate price of products.

“The degree of organisation of farmers in Bulgaria is below 6%, and according to the EU, the critical minimum is 20%. In Greece, the cooperation is over 60%,” he said.

Contacted by EURACTIV, a European Commission spokesperson declined to comment on the issue, considering that Sofia’s initiative is still a draft law.

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The state-owned stores

The Romanian government also tried in January to help the local fruit and vegetable sector by creating the so-called “Agribusiness House Unirea”, a state-owned company aiming to create a national network of more than 60 fruit and vegetable retailers.

The goal was to increase the consumption of local products and facilitate their distribution throughout the country against competition from foreign chains. The company focuses on smallholders and gets public funding.

But Emil Dumitru from the Romanian farmers’ association criticised the government for this move saying that it represents a “return to communism” and goes against the free market spirit.

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[Edited by Zoran Radosavljevic]

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