UNITED AGAINST VAT FRAUD?PRACTICAL ASPECTS OF

COOPERATION BETWEEN MEMBER STATES AND EU INSTITUTIONS

SLOVENIAN PRESPECTIVE

Marjetka Štemberger, M.Sc.

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Social

sec

urity

con

trib

utio

ns

VAT

Other taxes

Tax on salaries paidPerso

nal inco

me tax

Corporate income tax

The Tax Administration provides taxpayers with services of the highest quality and in this way it assists them at tax compliance with fair and unbiased use of tax regulations.

THE MISSION

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ORGANISATION OF THE TAX ADMINISTRATION

The Tax Administration of the Republic of Slovenia is a constituent part of the Ministry of Finance.

It consists of:• General Tax Office,

• 15 tax offices with branches,

• Special Tax Office (Large Business Office).

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REGIONAL TAX OFFICES WITH BRANCHES

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FIELDS OF INTERNATIONAL INFORMATION EXCHANGE

INTERNATIONAL INFORMATION EXCHANGE UNIT

Mutual assistance in the field of direct taxation and taxation of insurance premiums (Council Directive 77/799/EC)

International Information Exchange based on Double Taxation Convention

Automatic exchange of information on savings income in the form of interest payment (Council Directive 2003/48/EC)

Mutual assistance between MS of the EU in recovery of taxes (Council Directive 76/308/EGS)

Administrative co-operation in the field of VAT (Council Regulation 1798/03/EC)

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NEED FOR EXCHANGE OF INFORMATION

Globalisation of economies and removal of exchange controls and other barriers to the free movement of capital promote economic development and world trade.

BUT increase possibilities of tax avoidance and evasion, which have

effects on fiscal equity and on budgets, as well as they distort international competition.

European Union: free movement of goods and services; removal of tax borders between MS.

THUS Need to control the correct application of the VAT rules = an

international problem.

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ADMINISTRATIVE COOPERATION (1)

COUNCIL REGULATION (EC) NO 1798/2003 of 7 October 2003 on administrative cooperation in the field of value added tax and repealing Regulation (EEC) No 218/92.

COMMISSION REGULATION (EC) No 1925/2004 of 29 October 2004 laying down detailed rules for implementing certain provisions of Council Regulation (EC) concerning administrative cooperation in the field of value-added tax.

Exchange of information on request:o Request for information and for administrative enquires,o Presence in administrative offices and participation in administrative

enquires,o Simultaneous controls.

Request for administrative notification

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ADMINISTRATIVE COOPERATION (2) Exchange of information without prior request:

o automatic exchange,o structured automatic exchange.

Categories of information to be exchanged without prior request regarding:

o Sales of new transport vehicles,o Long-distance sale which is not VAT applicable,o Information about possible deviations and misconducts in

transactions of goods in EU – VIES,o Information on (potential) "missing traders" but VAT

identification number has not been cancelled,o Information on (potential) "missing traders" taxpayer and ID

number cessation.

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CLO (Central liaison office) The main tasks of CLO are as follows:

•Transfer of VIES data

•VAT number validation service

•VAT control:

•Regular checking,

•Support to auditors (controllers and auditors),

•Mutual assistance.

•Coordination and distribution of information

•Administrative cooperation (translations, requests and answers must be completed and understandable, taking care of deadlines, etc.)

•CLO located at General Tax Office

• 3 employees

• contact person at each local office

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HOW CLO FUNCTIONS AT LOCAL LEVELS?

Director of the General Tax Office

CLO official

LO 1 Director

LO16 Director

LO 2 Director

CLO official

Controller 1

Auditor 1

General Office

Local Office

organisation

function

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EXCHANGE OF INFORMATION ON REQUEST (1)

CLO receives the SCAC 2004 form or SCAC 383 form via CCN/CSIWork procedure: - Inspection of the form (as well as checking of the eligibility),- Data verification of the taxable person established in Slovenia and the taxable

person established abroad,- Verification of turnover data in the VIES system,- Translation of the form, - Deposition of the original form, of the translation and of any eventual

documentation on the authorised tax office (on the directory), - Notification of the tax office employee, who is responsible for CLO, about the

reception of the form and establishing a 1-month deadline for finding a solution (defining a date),

- In case that the tax office was not able to acquire information by the imposed deadline, it has to report it to CLO; nevertheless we follow the principle that the applicant state is notified about each discovered case in a required 3-month period,

- Reception of the answer from the tax office,- CLO verifies the answers, checks the VIES system data, translates answers and

together with any eventual documentation sends them to the applicant state via CCN/CSI e-mail.

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EXCHANGE OF INFORMATION ON REQUEST (2)

CLO receives the SCAC 2004 form or SCAC 383 form from the tax office via the directory

Work procedure: - Inspection of the form (as well as checking of the eligibility),- Data verification of the taxable person established in Slovenia and the taxable

person established abroad,- Verification of turnover data in the VIES system,- Translation of the form, - Sending the form and the eventual documentation to the requested state via

CCN/CSI e-mail,- Reception of the answer from the requested state,- Verification of the answers and of the documentation,- Translation of the answers,- Deposition of the original form, of the translation and of any eventual

documentation to the directory,- Notification of the tax office employee, who is responsible for CLO, about the

reception of the answer.

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PROCEDURES IN DEVIATION ANALISYS OF DATA OF THE LIABLE PERSON AND VIES

VIES <> ACQUISITON(unaccounted differences in the

documentation of the liable person)

INFLUENCE ON VAT RETURNS IN THE

REP. OF SLOVENIA

YES

NO

MAKING REQUEST IN

THE EU

TRANSFER OF INFORMATIONWITHOUT PRIORREQUEST (STRUCTURED AUTOMATIC)

DIFFERENCE > +- 5%

YES

NO

INFORMATION IS NOT SENT

ANSWER OF THE EU

IRREGULARITIES

YES VAT ASSESSMENT

FOR THE DIFFERENCE

PROCEDURE STOPPED

N0

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2005 2006 2007 2005 2006 2007

Austria (AT) 1 3 6 11 28 20

Belgium (BE) 3 3 7 4 29 10

Bulgaria (BG) 2 0

Cyprus (CY) 0 0 2 0

Czech Republic (CZ) 3 10 6 2 1

Germany (DE) 27 42 91 148 193 126

Denmark (DK) 0 0 2 0

Estonia (EE) 0 1 0 0

Greece (EL) 1 0 1 0 0

Spain (ES) 1 0 2 6 0

Finland (FI) 0 0 1 0 0

France (FR) 0 1 2 5 1

United Kingdom (GB) 1 0 3 1 4 8

Hungary (HU) 41 35 97 2 7 13

Ireland (IE) 2 0 0 1 1

Italy (IT) 3 12 33 17 65 48

Lithuania (LT) 0 1 0 0

Luxembourg (LU) 2 0 0 2 5 2

Latvia (LV) 2 1 1 0

Malta (MT) 0 0 0 0

The Netherlands (NL) 4 0 11 11 5

Poland (PL) 1 1 0 1 0 0

Portugal (PT) 0 0 0 0

Romania (RO) 1 0

Sweden (SE) 2 0 2 1 1 0

Slovak Republic (SK) 2 2 7 0 11

TOTAL 89 115 260 203 362 246

Number received Number sent

STATISTICS -REQUEST FOR INFORMATION (Article 5)

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SPONTANEOUS EXCHANGE OF INFORMATION (1)

CLO receives spontaneous information in the SCAC 2004 form or SCAC 383 form via CCN/CSI e-mail

Work procedure: - Inspection of the information,- Data verification of the taxable person established in Slovenia and the taxable

person established abroad,- Verification of turnover data in the VIES system, - Translation of the spontaneous information, - Deposition of the original form, of the translation and of any eventual

documentation on the authorised tax office (to the directory), - Notification of the tax office employee, who is responsible for CLO, about the

reception of the spontaneous information and establishing a 1-month deadline for a feedback information (defining a date),

- Reception of the answer to the spontaneous information from the tax office,- CLO verifies the answers, checks the VIES system data, translates findings and

together with any possible documentation sends them to the applicant state via CCN/CSI e-mail.

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SPONTANEOUS EXCHANGE OF INFORMATION (2)

CLO receives spontaneous information in the SCAC 2004 form or SCAC 383 form from the tax office via the directory

Work procedure: - Inspection of the spontaneous information,- Data verification of the taxable person established in Slovenia and the

taxable person established abroad,- Verification of turnover data in the VIES system,- Translation of the spontaneous information, - Sending the spontaneous information and the eventual documentation

to the relevant Member State via CCN/CSI e-mail,- Reception of the eventual answer from the Member State,- Verification of the answer,- Translation of the answers,- Deposition of the original answer, of the translation and of the eventual

documentation to the directory,- Notification of the tax office employee, who is responsible for CLO,

about the reception of the answer.

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AUTOMATIC AND STRUCTURED AUTOMATIC

EXCHANGE OF INFORMATION

Information sent:

Calendar year

New means of transport

VAT Refund

Allocation of VAT ID number

Information of missing

traders

Information about potencial missing traders

2005 337 691 145 - -

2006 61 2,854 55 16 22

2007 357 3,672 97 182 72

AUTOMATIC AND STRUCTURED AUTOMATIC EXCHANGE OF INFORMATION

Information sent:

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AUTOMATIC AND STRUCTURED

AUTOMATIC EXCHANGE OF INFORMATION

Information sent: AUTOMATIC AND STRUCTURED AUTOMATIC EXCHANGE OF INFORMATION

Information received:

Calendar year

New means of transport

VAT Refund

Allocation of VAT ID number

Information about

potencial missing traders

Information of missing traders

2005 - 1,658 - - -

2006 27 2,138 55 - 276

2007 9 5,361 63 - 5,702

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SUPERVISION PROCEDURES

Introduction of system supervision over newly registered companies for VAT,

Introduction of computer-supported auditing with ACL programme, Introduction of procedure of pre-registration supervision at allocation of

identification number for VAT purposes, Introduction of procedure for cancellation of identification number for

VAT purposes out of official duty, Introduction of rotation audits, Introduction of special audit supervision methodology in cases of

carousel evasion or missing trader frauds, Preparation of a special programme of annual tax audit supervision for

VAT and definition of risk areas in connection with VAT.

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ORGANISATIONAL MEASURES

Establishing of an investigative and analytical service which deals with prevention and discovering of tax evasion (mainly in the field of VAT).

VAT group which provides uniformity and legality of decision-making in tax audit supervision on the central level with the assistance of preventive methods - support to the inspector at decision-making in more difficult cases.

Introduction of specialists for individual fields - construction, services for guests (hotels, restaurants, etc.), transfer pricing, sale of cars, computer-supported auditing.

Starting with supervised projects – on the field of construction and motor vehicle.

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PROJECT MANAGAMENT OF TAX AUDIT

Starting February 2008 (2 projects: Construction and Motor Vehicle)

Involved 70 % of the resources (tax auditors)

ADVANTAGES:

Monthly meetings – spread a good and equal practice on the whole area of Tax Administration, frequent communication between auditors,

Specialization of auditors,

Audits are quick and effective,

Public announcement – increase of voluntary compliance of tax liabilities,

Cooperation between departments in Tax Administration.

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CHANGES OF THE VAT ACT

Newly registered persons liable for VAT shall submit monthly settlements during the period of one year - quicker reaction time for discovering missing trader companies.

Shortening of the time limit for withdrawal of VAT identification number if the taxable person fails to submit VAT settlements from 12 to 6 months (for foreign persons from 6 to 3 months) - possibility of withdrawal of VAT identification number without a special declaratory procedure.

Possibility of withdrawal (cancellation) of VAT identification number according to the official procedure in cases where the taxable person fails to meet requirements for registration - missing trader companies.

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CHANGES OF THE VAT ACT – FIGHT AGAINST VAT EVASION

Possibility of temporary insurance between audit procedure in cases of doubtful higher claims for VAT refund.

Possibility of requesting insurance or requesting warranty in cases of suspicious large VAT refund requests - before VAT refund, the taxable person shall submit appropriate insurance or warranty, from which possible obligations in cases of illegal claim may be paid.

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OBJECTIVES

Achieving higher level of quality and not quantity of work, and with this improvement of voluntary tax compliance and provision of uniformity of tax administration's operations.

Provision of uniqueness of taxation in cases of international transactions and tax frauds  with the system of taxation of transactions according to their economic contents.

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COOPERATION WITH STATE INSTUTIONS

The quality of supervision division performance depends also on effective cooperation with the following state institutions:

o Customs Administration, o Office for Money Laundering Prevention,o General police Office,o State prosecution,o Court of Auditors of the Republic of Slovenia,o Budget Supervision Office.

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ESTIMATED ADDITIONAL LIABILITIESIN THE PERIOD BETWEEN 2006 AND 31 MARCH,

2008

Calendar Year

Number of audits

EstimatedAdditional

Liabilities in €

Out of which VAT in €

Number of persons liable to

VAT

Number of all

inspectors (average)

2006 5,069 69,058,738.1131,045,447.3

489,085 358

2007 6,278 87,067,610.0038,367,988.8

087,163 362

2008(1st

quarter)1,667 23,043,444.60

11,479,996.62

88,381 335 

 

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CONCLUSION

• Adoption of all necessary measures against tax frauds to prevent distortion of competition on the common market.

• Operation of infrastructure for communication and information exchange and provision of uniform application of the Community law.

• It requires a high common standard of understanding of the Community law and its application in all Member States.

• We achieve this only with effective training and national legal and transparent control procedures with more intensive and effective information exchange in the field of prevention of tax frauds.

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THANK YOU FOR YOUR ATTENTION!