Filenews 29 August 2022
Accumulation of overdue revenues of more than €2 billion, among other things, has been identified by the Audit Office of the Tax Department.
The report covers the year 2020, unless explicitly stated otherwise, as noted by the Audit Office. The report shows financial costs in the failure to appoint a Tax Commissioner and Assistant Tax Commissioners as well as long delays in the control of data, the examination of objections and pending issues in the collection of dues. Also, employees of the public and wider public sector who hold shares and / or have the position of Director / Secretary in private companies were identified, who did not secure the relevant license, contrary to the provisions of the legislation and / or regulations that apply in each case.
The most important findings of the audits during the Audit Office are the following:
-Annulment of the Appointment of the Superintendent of Taxation and Assistant Superintendents of Taxation by the Administrative Court, with possible significant financial consequences for the State. The NHRF proceeded with the appointment of the Tax Commissioner with effect from 1.7.2022.
-Accumulation of overdue revenues of more than EUR 2 billion. We suggested that the Department use all the tools at its disposal, including the new measures, based on the provisions of Law 80(I)/2014, to limit uncollected taxes.
-Accumulated taxes under appeal. We suggested that an attempt be made to examine the old objections as soon as possible, and that the new objections be dealt with without delay.
-Non-submission of income declarations by natural and legal persons for a number of tax years and non-imposition of taxes by the Department, based on the judgment of the Superintendent, as provided for by the relevant legislation, resulting in the loss of revenue of the State. We suggested that the Department request the submission of income returns for all years and the imposition of relevant taxes and penalties, in accordance with the legislation.
-Taxpayers who do not declare all their income or declare part of it, with a significant loss of revenue from the State. We recommended the tax investigation of these cases, including the consideration of capital status and the imposition of taxes, in accordance with the legislation.
-Delay in the examination and issuance of taxes by the Department. We suggested that the relevant taxes be issued in a timely manner and at least within the six-year period provided for in section 23(1) of the Assessment and Collection of Taxes Law.
-Companies registered with the Department of the Registrar of Companies and Intellectual Property (TEEDI), which are not registered with the Department of Taxation – Direct Taxation (do not have an income tax file) and do not submit income declarations. We suggested that the Department proceed to a comparison of the data relating to companies included in the computerized system of the TECHNICAL CHAMBER of Greece and the Department of Taxation (direct and indirect taxation), in order to identify any undeclared income.
-Identification of cases of companies, with a turnover declared for indirect tax purposes, which, however, was not declared for direct tax purposes or is greater than that declared for direct taxation purposes. We suggested that all specific cases be investigated and that taxes should be imposed where required. We also suggested that the Department utilizes the data at its disposal and compares, on a regular basis, vat and income tax data, in order to increase its tax collection capacity and minimize tax evasion.
-Absence of a mechanism for the regular reconciliation of the central accounting system (FIMAS) with the individual computer systems and other sources of information, by the accounting department of the Department of Taxation, as a result of which the completeness and correctness of the Department's receipts cannot be confirmed.
-Non-comparison / utilization of information of the Department's systems (TEP Vs VAT) and non-utilization of information from other Government Departments. We suggested that the Department should make appropriate use of both the department's computer systems and the information provided by other government departments and impose relevant taxes, where appropriate, in accordance with the legislation.
-Employees of the public and wider public sector who hold shares and / or have the position of Director / Secretary in private companies were identified, who did not secure the relevant license, contrary to the provisions of the legislation and / or Regulations that apply in each case. We have recommended full compliance with the relevant legislation / Regulations and for this purpose the adoption of measures so that the legislation is applied and those who violate it are subject to the prescribed penalties.
-Internal offsetting of large amounts of VAT, without on-the-spot checks and audits by the office (desk audits). We suggested that the Department intensify on-site visits, in cases of taxpayers with significant requests for VAT refund / offsetting, in combination with other types of desk audits, depending on the risk of the taxpayers, as determined by the Department.
-Delay in the refund of VAT by the State, resulting in the payment of a significant amount of interest.
Additional revenues resulting from complaints submitted by citizens to our Service.
-Low percentage of inspection visits to the premises of persons registered in the VAT Register. We suggested that visits to taxpayers' premises be intensified, through the possible strengthening of the Tax Inspection Units, in order to prevent tax evasion, the protection of public revenues, the creation of tax consciousness and generally the implementation of the relevant legislation.
-Use by investors of the Cyprus Investment Program of the reduced VAT (5%), for the privately owned residence they buy / build, for which our Service does not agree, based on the relevant European Directive.
-Identification of cases of companies carrying out transactions with related persons, with the possibility of non-compliance with the provisions of the relevant legislation. We suggested the investigation of such transactions by the Department and the application of Article 33 of the Income Tax Law.
-Identification of serious weaknesses in the recording and monitoring of the time of arrival and departure of the employees of the Department and unevenness in the general handling of the system for recording / monitoring the working time of the employees of the Department.
We suggested that the necessary actions be taken, for proper observance and monitoring of the statutory hours of the Public Service.
