Implementation of Horizontal Monitoring Model for Large Taxpayers in Bulgaria

The Commission helped the National Revenue Agency (NRA) to develop and implement a new approach of working with large taxpayers that will strengthen the voluntary compliance and increase the level of trust and cooperation.

The horizontal monitoring model (HMM) refers to the establishment of mutual trust between taxpayers and the Revenue Agency, and to a more precise specification of responsibilities towards each other, as well as the possibilities for current application of the law and compliance with commitments made under agreements between the parties.

As a result, the relationship and communication between taxpayers and the NRA become equal (horizontal) and shift the focus from more subsequent control measures to preliminary monitoring, conversations and consultations

Context

The design and the implementation of a HMM for the NRA’s corporate clients is an important priority set by the current Strategy of the Agency for countering the risks related to transfer of profits and income abroad. The HMM shall further enhance the voluntary compliance among large taxpayers based on mutual (informed) trust, cooperation, understanding and transparency of their relations with the revenue administration. Furthermore, the HMM is an important instrument to counter tax non-compliance internationally.

The complexity of the cooperative compliance programmes and their implementation involving numerous stakeholders, intensive communication, complex political and socio-economic context, and knowledge and skills beyond traditional expertise, urged the NRA to request technical support from DG REFORM.

Support delivered

The project addressed the needs of the NRA by analysing the environment in which the Agency operates, performing a benchmarking study in the field of cooperative compliance programmes in other countries, elaborating a framework for a tailor-made HMM and preparing an implementation plan. Furthermore, the project designed the processes and elaborated operational procedures for the implementation of the model, and delivered trainings to the staff of the NRA. In addition, the project helped the Agency develop a communication strategy regarding the new HMM and carry out some communication events.

The following main deliverables have been produced as a result of the technical support:

• Technical report describing the HMM;
• Operational processes and procedures for the HMM;
• Report from the pilot testing of the HMM;
• Training materials and training sessions on the HMM;
• Communication strategy and materials on the HMM for the large taxpayers and the general public

Results achieved

The project resulted in the following benefits for the NRA:

• Adoption and implementation of a horizontal monitoring model adapted to the environment - economic, political and social context, in which the Bulgarian tax system operates.
• Enhanced knowledge and skills of the NRA’s staff on cooperative compliance approaches and the horizontal monitoring model tailor-made for the Agency.
• Promotion of the horizontal monitoring model among the external stakeholders and participants in the programme.

In medium and long term, the project shall help NRA increase the efficient use of its resources, strengthen tax compliance and build up the confidence in the tax system of the country.

More about the project

You can read the final report and the factsheet here: