Countering Cross-Border VAT Fraud : The Bulgarian Experience

This paper draws on the experience of Bulgaria in identifying the types and modus operandi of VAT frauds with a focus on the abuse of tax credit. It analyses the elements of tax design conducive to such abuses and discusses the possible solutions in the light of the international and domestic experience and the capacity of the tax administration. It offers a critical analysis of the Bulgarian anti-fraud device the VAT account, as well as the various alternative policy and administrative measures proposed or applied as barriers to VAT abuse, including the policy proposals in the domain of commercial registration and price controls on business transactions. The study concludes that the possible solutions should be sought along the lines of optimizing risk management techniques and especially the implementation of the principle of joint responsibility rather than through tighter control at entry or on the conduct of business