Breakthrough in Bulgaria

08 Nov 2013

As is the case in many markets across the world, Scotch Whisky is growing in popularity in Bulgaria.

Since Bulgaria joined the European Union in 2007, a number of trade barriers have been removed. Improved market access and EU legislation has been good for trade: Scotch Whisky exports rose from £8.5 million in 2006 to £20.1m last year. 

But deeper-rooted problems remain, especially poor tax collection on local spirits and a large grey / black market. The Bulgarian government has tried to address these issues by regularly changing the style of strip stamp - the paper band placed over the closure of a bottle in many markets to show tax has been paid. While strip stamps are intended to guarantee government revenues, we greatly doubt their effectiveness. 

There was huge disruption the last three times strip stamps were changed in Bulgaria in 2004, 2007 and 2009. Traders had to retrieve stock from retailers and wholesalers to remove the old stamp and apply a new one.  Tax had to be paid again and Scotch Whisky producers waited as much as two years to be reimbursed the original tax. 

When the Bulgarian government announced it was changing stamps again this year, alarm bells rang.  Changes in legislation since 2009 meant stock could not be returned for re-stamping and excise already paid could not be reimbursed.  The only option seemingly available was destruction of stock.

With the government initially reluctant to act, the SWA raised high level concerns in the European Commission and British Embassy.  A working group involving Bulgarian officials and Scotch Whisky traders was quickly established and a 12 month transition period was agreed to allow stock with old stamps to be sold.  While this addressed our biggest concerns, officials would not consider further action for any 'old' stock still on sale after the transition period. 

With some high value Scotch Whiskies potentially affected, we visited Sofia to discuss the situation with senior Customs officials.  This month, officials agreed to make provisions for any Scotch Whisky left unsold after the transition period. 

Thanks to a resolution being reached on this issue, Scotch Whisky importers have avoided costs of almost 3 million euro.

The pragmatism of Bulgarian officials is greatly appreciated, as is the considerable support from the Embassy in Sofia.  The episode is an excellent example of collective action involving trade and officials delivering results for the industry. 

Nick Soper is SWA Director of European Affairs