Financial Crime World

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Bulgaria’s Compliance Risk Assessment Templates: A Model for Regional Reform

SOFIA, Bulgaria - In a recent regional event on modern approaches to tax compliance, experts shared Bulgaria’s experience with implementing compliance risk management (CRM). The National Revenue Agency (NRA) has made significant strides in this area, and its approach is considered a model for regional reform.

History of CRM Implementation

According to Ms. Boryana Georgieva and Ms. Evgenia Cholakova, responsible for managing and coordinating processes aimed at increasing voluntary taxpayer compliance, the NRA began developing its CRM strategy in 2008. The agency established a unified approach to risk management, guided by OECD principles, to identify, analyze, and treat risks related to non-compliance with tax and social security legislation.

Key Components of CRM

The NRA’s Client Services Directorate is responsible for informing taxpayers of their liabilities and providing necessary information. However, the agency recognizes that there are different degrees of non-compliance, ranging from simple mistakes to intentional attempts to avoid taxes. This requires tailored treatment strategies.

  • Identifying Risks: The NRA employs a risk analysis approach to identify potential areas of non-compliance.
  • Analyzing Risks: The agency analyzes identified risks to determine their likelihood and impact.
  • Treating Risks: Based on the analysis, the NRA develops targeted strategies to address each risk.

A Notable Compliance Project

In one notable compliance project, the NRA identified a risk related to undeclared social security contributions by self-employed individuals. A 2009 risk analysis revealed that approximately 38% of these taxpayers failed to meet their obligations, with potential damages estimated at €28 million.

To address this risk, the agency employed several measures, including:

  • Phone calls and official letters to non-compliant taxpayers
  • Educational brochure published and made available on the NRA’s website

The results of this project showed that:

  • 42% of contacted taxpayers submitted their declarations after initial phone calls
  • Further reductions in non-compliance achieved through subsequent measures

Lessons Learned and Future Focus

The success of this CRM project led to its removal from the national program for 2015. The NRA’s future focus will be on developing knowledge about taxpayer behavior and compliance psychology, with a goal of improving capacities in segmentation and profiling for compliance risk management purposes.

Regional Impact

The Bulgarian experience was shared at a learning course on modern approaches to tax compliance, part of the Supporting Capacity Development of Tax Administrations in South East Europe project. The project aims to strengthen the capacity of regional institutions in implementing EU recommendations on tax compliance risk management.