VAT Frauds and the Challenges to Bulgarian Tax Policy and Administration in Enlarged Europe

The 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 credits. It analyses the elements of tax design, conductive to such abuses, and discusses 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 and applied as barriers to VAT abuse, including policy proposals in the domain of commercial registration and price controls on business transactions. The study concludes that possible solutions should be sought along the lines of optimising 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.