Bulgarian duty-free store closures “creating contraband problem”

Bill Lumley

11-Jan-2011

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The 2008 border store ban is charged with increasing cross border smuggling rather than reducing it

The closure of Bulgarian duty-free stores has resulted in an escalation of contraband tobacco, according to critics. Stores were closed at the borders with Turkey, Macedonia and Serbia under pressure from the European Community (EC) in an attempt to end European border duty-free in 2008.

The Commission argued that border duty-free stores in two eastern European countries, Romania and Bulgaria, were sources of smuggling. But in October 2010 EU ombudsman Nikiforos Diamanduros, announcing his decision in connection with the Bulgarian duty-free complaint in an EC interim report, said: “The EC has demonstrated clear maladministration on the Bulgarian duty-free case and it used misleading information in this report.” He went on to claim there was no supportive evidence used by the EC to attack on the Bulgarian duty-free business and dated February 2008.

The EU has now postponed the decision to assign Schengen status to Bulgaria until March 2011. Bulgarian Duty Free and Travel Retail Association chairman Radostin Genov told DFNIonline: “We warned Bulgarian politicians at the time that closure of the shops would result in much higher levels of contraband. The high level of contraband along the borders that has evolved as a result of the border store ban two-and-a-half years ago is the main reason for the EU to postpone Bulgaria’s assignment to Schengen status.

“We have explained to Bulgarian politicians that duty-free business is an economic instrument to hit contraband, because in the absence of duty-free shops all tourist and passenger flow will fall into the hands of illicit sales channels that sells goods uncontrolled, unqualified and dangerous for passengers’ health at low prices in uncontrolled places.”

He added: “The state budget is harmed. Now Bulgaria is losing about €80m [$103.8m] annually from the absence of duty-free in the form of taxes, social insurance, bank taxes, salaries and so on.”

In addition, Genov said, the closure of duty-free stores contributed to estimated annual tobacco smugglers’ profits of more than €250m.

A number of other Eastern European states are fighting the case for Bulgaria to enter the Schengen zone, among them Hungary, which holds presidency of the EU in 2011. France and Germany are among those opposed, citing poor border and immigration controls.