Draft Law on Accounting, No. 502-01-64, submitted by the Council of Ministers on 29.07.2015.

MRS MENDA STOYANOVA
CHAIRMAN OF THE COMMISSION
ON BUDGET AND FINANCE
TO THE NATIONAL ASSEMBLY

REGARDING: Draft Law on Accounting, No. 502-01-64, submitted by the Council of Ministers on 29.07.2015.

DEAR MRS STOYANOVA,

We would like to hereby inform you that KRIB supports all the principled and specific proposals made in relation to the draft Law on Accounting by the Institute of Certified Expert Accountants (Your entry no. PG-510-00-58/01.09.2015 ) and the Association of specialized accounting companies (Your entry No. PG-506-01-194/15.09.2015), not taking a position on the topic related to the mandatory financial audit of joint-stock companies.

In addition, we would like to express our opinion on the proposed change in Art. 76 of the Bill. We do not support the same, with the following reasons.

Under the current regime, the legislator has adopted a sanctioning approach with certain, within relevant limits, precisely established property sanctions for legal entities. For example - according to paragraph 1 of Article 47 - from 500 to 1500 BGN, according to paragraph 2 - from 2000 to 3000 BGN, according to paragraph 3 - from 500 to 3000 BGN, etc.

In the proposed bill, however, a radically different administrative penal approach is adopted. Instead of the specifically defined mathematical parameters of the sanctions, the approach adopted in the Law on the Protection of Competition is proposed, i.e. for the sanctions to be in a variable amount - for example in Article 76, paragraph 1 of the draft law on accounting instead of the previous property sanctions - according to Article 47, paragraph 3 from BGN 500 to BGN 3000, a sanction in the amount of 0,1% to 0,5% of the net revenue from sales for the reporting period, with a minimum of BGN 200. This is the approach also adopted in para. 2 of art. 76 of the draft law, where it is provided that in case of late publication within a period of up to 3 months, the sanctions are from 0,01% to 0,05%.

We do not find it justified, in the sphere of regulation of the financial accounting activity, that the sanctions are a percentage of a certain economic base - respectively - of the net income for sales or of the turnover. Thus, the proposed sanctions are excessive and do not correspond to the gravity of the administrative violation. At the very least, we believe that there should be a reasonable upper limit commensurate with the degree and gravity of the offence.

Sanctions of legal entities should be defined in precise mathematical parameters. Our members are currently studying the experience in other EU member states and we will present the results further.

In the context of this, we offer the following specific proposals in Article 76, Paragraph 1:

From BGN 2 to BGN 000 (identical to the proposed sanctions under Articles 10, 000 and 70 of the draft law, insofar as they are commensurate with the severity and importance of the violation) or alternatively,
The proposed in the project, but with a ceiling of no more than BGN 10.

In addition, KRIB proposes to give an option for the reporting period for accounting purposes (as well as for tax purposes) not to be tied necessarily to the calendar year, as this may not be suitable for presenting the relevant business or may not be consistent with the date of the consolidated report to international groups. Such a practice is widely adopted in almost all EU member states. We believe that the introduction of this proposal will significantly improve the business environment and help attract foreign investors to Bulgaria. Of course, the introduction of such a measure will be accompanied by the necessary restrictive conditions so that it cannot be used in bad faith in practice. In terms of fiscal effect, our analysis shows that this proposal will not have negative effects on public finances. We are ready to bring to your attention and discuss specific provisions.

With respect,
Eugene Ivanov
Ex. director