Paying taxes: a question of honor: charged with increasing revenues, Bulgaria's new tax agency seeks to change the public's mind-set.
"A well-functioning economy must have a good and reliable tax system, which collects revenue efficiently and treats taxpayers properly," said representatives of the World Bank in 2003. A new tax system was also a requirement for Bulgaria's accession to the European Union.
Previously, Bulgaria's revenue collection responsibilities were divided between the General Tax Administration Department and the National Social Security Institute. Since 2001, Bulgaria had undertaken a number of initiatives to improve its tax administration. But it was clear that the country needed to create both a unified revenue agency that collects taxes and social insurance contributions, and a reliable tax information system to match the needs of the country as a future EU member state.
The answer was the National Revenue Agency (NRA), established in 2005. The NRA's main goals are to improve revenues and to prepare Bulgaria for EU accession, but it has other objectives as well: to simplify and introduce new payment methods, including Internet-based methods; to provide "clients" (that is, taxpayers and contributors to the country's social security programs) with the necessary information about their duties; and to improve voluntary compliance and achieve better results for the sake of the country and the society.
Under the NRA, a new centralized revenue system fosters voluntary compliance, introduces improved tax collection and stricter state control, and has lower administrative costs. It maintains a common database, supports the development of the private sector and limits the functioning of the shadow economy. The agency secures the country budget by collecting the due income tax, value-added tax (VAT), patent and corporate taxes, health insurance and pension contributions, and mandatory pension insurance payments, as well as other funds, including the teachers' pension fund. It supports a national database and effectuates an international exchange of information.
Nobody likes taxes
Promoting simpler tax collection is not an easy thing. No one likes to pay taxes, and Bulgarians are no exception. Everyone complains that taxes are too high--even though a comparative analysis of the tax rates in European countries shows that Bulgaria's is among the lowest.
At the NRA, we decided that the best approach toward effective communication would be not to directly attack the belief that taxes are too high but to gradually overcome it. That is why the agency's executive director, Maria Murgina, announced early on, "We cannot make the paying of taxes and insurances more pleasant, but we can make it easier and more useful." The main PR steps were based on messages of civic duty and the societal benefits of paying taxes.
The NRA made the constant improvement of customer service its priority, extending a hand to its clients. The goal was to stimulate the voluntary declaration and payment of taxes and to build a new tax culture in a country where it was quite normal to talk about tax evasion. Simply put, we had to convince people why we should all pay our taxes promptly.
In addition to the traditional communication initiatives, we were looking for new approaches to make our strategy more open, focused and successful. One of the first steps was to explain to taxpayers how taxes can be legally reduced--and to do it before the tax filing deadline. The agency produced more than 700,000 brochures, along with media releases explaining how to alleviate tax payment. Our message was: "Let's play fair--no tricks, but valuable information!" We wanted NRA to be a partner to taxpayers, telling them, "We are honest and we expect honesty."
More than 500 organizations became our partners in the first month of the campaign and assisted us in reaching our goal in various ways. NRA partner organizations are both public and private institutions that help educate the public by organizing seminars and discussions and distributing brochures and information bulletins at their own location, by e-mail, through their web site or through other communication channels, free of charge. Partners in different initiatives include banks, hospitals, municipalities, cultural institutions, schools and retail chain locations.
We were gradually building the image of NRA as a responsible national institution, so that we could speak of the benefits to society that the paying of taxes would bring. Indeed, the initial trust in the agency was maintained over time. Eighty-two percent of companies and 72 percent of people approved of NRA's establishment. A public opinion poll conducted six months after the start shows that although there were difficulties, the level of trust in the NRA is one of the highest compared with that of other state institutions.
As a natural succession to the trust-building campaign, the agency started the "donation for culture" initiative with the National History Museum. We prepared a draft of an electronic national "Red Book," in which, with the cooperation of colleagues from all over the country, we included more than 100 significant historical and cultural objects that urgently need donations in order to be repaired and restored. Bulgarian legislation envisions an opportunity to reduce the tax rate by 10 percent to 15 percent, if a donation to restore these objects is made. We explained through examples and cases how, apart from reducing tax, this could be an act of good will for preserving and developing the historical and cultural heritage of Bulgaria. The book will be sent to more than 3,500 large companies and NRA partner organizations with the message "Let's play fair! If you would like to reduce your taxes, make a donation for the Red Book monuments." The most unexpected support for the campaign came from a theater troupe, which suggested putting on a play called "How Can I Reduce My Taxes by Donating for Culture?" based on NRA's brochure.
In less than six months, NRA positioned itself as the state institution with the least traditional PR. Our customers learned about taxes at the most unusual places: gyms, playgrounds, even McDonald's. The campaign casually made the issue visible to people during their leisure time, while they were at their favorite places, with their favorite people. One of our first partners was McDonald's Bulgaria. In the 17 restaurants of the chain across the country for an entire month, people could learn about NRA and what was new in the tax and insurance legislation after the start of the new agency. McDonald's provided special stands to distribute brochures, mainly on a newly introduced law that would allow families with children under 18 to recover a certain amount of their taxes.
The PR campaign using animated educational films whose characters represented a typical Bulgarian family won the agency not just sympathy but also strong supporters. A preliminary poll through focus groups showed that men, regardless of age, education or profession, like animation; women are more reserved in their feelings for it. But all confessed that animation attracts attention and improves understanding of complicated tax information.
Our first project was a film that explained how to submit an income tax declaration--a very boring subject, some would say. On the contrary! We had a stunning success. In five days the animated film was shown almost 500 times in more than 50 media outlets in the whole country, and at virtually no cost. The film characters--wife Maya and husband Vankata--are constantly arguing, presenting a typical atmosphere of a regular family. Through those arguments the viewers learn how to submit a tax declaration, what the deadline is and that they can easily do it by e-mail. The great interest in the film provoked the idea of initiating the "animation by e-mail" project. In this way, more than 3,000 NRA customers received the first animated film by e-mail or from the agency's web site. Currently we have five such educational films with an average length of one minute; the series, covering a variety of tax questions, will consist of 15 by the end of 2006.
Why do we pay taxes? Voluntary compliance
Undoubtedly, NRA's main goal is to increase and guarantee the revenue in the state budget. However, this does not mean that the tax rates should be increased. The aim of the new tax administration program is to ensure that individuals and companies are convinced that they should pay their taxes out of good will, thus contributing to the welfare of all citizens. Among NRA's customers are farmers and village people, owners of small and medium-size enterprises, industrial giants, and Bulgarians living abroad. According to a national survey conducted in mid-2006, 61.2 percent of respondents said that they wanted more information about what their money would be spent on. To us this means that we should continue working toward maintaining an active public dialogue and transparency in order to gain the trust of our clients. Again, we look for nontraditional approaches and are currently preparing an innovative revenue administration campaign titled "Why Should I Pay?" which we hope will provoke our customers to take part in the discussion, and turn them into our supporters. At the same time we are working on an educational project that will allow us to enter even more nontraditional places and reach children and teenagers. We have a PR dream--to create a strategy computer game in which we can demonstrate why taxes are paid.
This is a process of improving the efficiency of the tax collection system and taxpaying culture of the people. Just six months after the start of NRA, the agency is nearly twice as efficient as its predecessor and has received the first "pat on the shoulder" from the World Bank and the International Monetary Fund, which were closely following the project's development and ensuring its funding. In July, World Bank experts announced in Washington, D.C., that this is the most successful tax reform project in Eastern Europe. Revenues actually increased in comparison to previous years. For example, it is expected that the overall improvement of public revenues during the first year will be at least 10 percent higher. The corporate tax revenues went up more than 25 percent. The overall revenue for the first six months after the start of NRA is 5.5 percent higher, compared with the same period in 2005, despite an expected economic downturn.
educate and entertain
Bulgaria's National Revenue Agency has produced a series of short animated films to help the public learn more about taxpayer issues, The films' characters represent a typical Bulgarian family and have been a hit with citizens, who can view the promos online as well as in regular TV segments.
Cheers! To pay taxes is so easy!
Vanka, the cash receipts are very useful!
How can I submit my income tax declaration?
You can send your declaration by post or Internet.
Juliana Toncheva is a communication director of the National Revenue Agency of Bulgaria, as well as a journalist and media expert.
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|Title Annotation:||National Revenue Agency|
|Date:||Nov 1, 2006|
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