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Round Table Discussion: Grey Economy: Trends and Challenges
On 27 May 2008 the Center for the Study of Democracy, with the support of the Royal Dutch Embassy in Sofia, organized a round table discussion, dedicated to the challenges the grey economy poses on Bulgaria's economic development and competitiveness and the possibilities for implementing effective public policies in this area.

The round table was opened by the Ambassador of the Netherlands Mr. Willem van Ee and Dr. Ognian Shentov, Chairman of the Center for the Study of Democracy. Mr. van Ee pointed out that fighting the grey economy is a shared interest of the Government, the business and the citizens, since it slows down economic growth and decreases budget revenues, thus also lowering national welfare. Dr. Ognian Shentov proposed the establishment of a public-private platform for transparent governance and business ethics as key instrument and basis for tackling the grey economy problem in Bulgaria. He also stressed that there should be two priority areas of policy response and in controlling the grey economy – judicial and law enforcement reform, and public funds’ management, including strict monitoring of the public procurement deals, concessions, land swaps.

Mr. Ruslan Stefanov, Coordinator of the Economic Program at the Center for the Study of Democracy presented the annual Hidden Economy Index, which has been tracking the dynamics of hidden economic activity in the country since 2002. All CSD analyses from the past 10 years reveal the existence of a vicious circle between corruption and grey economy in Bulgaria. The grey economy is a constant source of corruption payments for various purposes – from evading fines and other penalties to state capture. In this context the Center for the Study of Democracy presents the Hidden Economy Index as an instrument for assessing the efficiency of various policies, as well as for identifying the areas that need highest attention by the state and the business.

The Minister of Finance, Mr. Plamen Oresharski, highlighted the success of the measures towards the legalization of companies’ turnover. He underlined that tax reform and the establishment of the National Revenue Agency have had the greatest impact on decreasing the level and scope of the grey economy in Bulgaria. The Mayor of Sofia Mr. Boyko Borissov described various cases of corruption, fraudulent practices and schemes in Bulgaria, documentary covered as legal activities. He provided specific recommendations for improving regulations and control towards increasing VAT collection on car registrations and excise goods imports. In conclusion the mayor repeated his demand for adopting a Law on Public Private Partnerships. Prof. Valery Dimitrov, Chairman of the National Audit Office added that the grey economy is mostly caused by heavy government regulations and lack of economic freedom.

The private sector representatives – Mr. Bertram Rollman, owner of Pirin Tex, Mr. Bozhidar Danev, Chairman of the Bulgarian Industrial Association and Mr. Stefan Szyszkowitz, Chairman of the Managing Board of EVN Bulgaria presented specific recommendations for limiting the grey economy, such as wider introduction of silent consent for public administration decisions, equalizing real estates tax appraisal with their current market price, connecting all cash registers online, etc. The Center for the Study of Democracy will collect, publish and disseminate the recommendations, provided by the participants in the discussion.

The Minister of Interior, Mr. Mihail Mikov, highlighted the coalescence between the black, grey and white economy and the necessity of establishing a wide public coalition for countering the grey economy.

Media Advisory (Adobe PDF, 181 KB, in Bulgarian)
Policy Brief: Levelling the Playing Field in Bulgaria. How Public and Private Institutions Can Partner for Effective Policies Targeting Grey Economy and Corruption (Adobe PDF, 1.9 MB, amended version)
The Grey Economy in Bulgaria – presentation of Mr. Ruslan Stefanov (Adobe PDF, 1.3 MB)
The Grey Economy in Bulgaria: Trends and Challenges – presentation of Mr. Bozhidar Danev, Chairman, Bulgarian Industrial Association (MS Power Point, 706 KB, in Bulgarian)

International Media Coverage
Bulgarian Media Coverage
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