The awareness of VAT tax frauds and necessity to implement effective preventive measures is more and more widespread in the European Union. While opening the meeting of the Contact Committee VAT Group in Warsaw, NIK President stressed that Poland has collected extensive experience in this scope. The Supreme Audit Office of Poland is an active member of the Contact Committee associating the Supreme Audit Institutions of the EU Members States and the European Court of Auditors. NIK conducted many VAT-related audits and formulated conclusions, which were used to enhance the system. At the conference organized in Warsaw NIK was handed over the chairmanship in the CC VAT Working Group.
The VAT revenue is the main source (over 40%) of the state budget income. In 2013-2015 the false invoice and tax carousel frauds were widespread. These mechanisms were used to fake the flow of goods between the EU Member States in order to evade VAT payment. Tax administration was not effective enough to prevent such practices.
In his opening note President Kwiatkowski said that he is glad and honoured that NIK was selected to host the conference. - SAIs often inquire about our audits concerning the tax system - added NIK President.
Krzysztof Kwiatkowski presented the results of NIK latest audits related to VAT evasion and its prevention methods. In 2017 tax services and good economic situation resulted in an increase of the State Treasury revenue by PLN 30 billion in comparison with 2016. The tax loophole was also mitigated. Such measures as, among others, Standard Audit File for Tax, fuel package or transport package were introduced. IT tools are also more extensively used to spot entities that may evade the VAT tax. Giovanni Coppola of the Italian SAI finds the approach of NIK and the Polish tax administration very interesting. ”We are particularly interested in the fact that, for instance in case of the reverse charge, the amount, of course having been verified, is left on the tax payer’s bank account, which enables to avoid liquidity issues. This is the most frequent problem among entrepreneurs, also in Italy” - said Giovanni Coppola. At the conference the Italian SAI handed over the chairmanship in the VAT Working Group to NIK.
Meeting participants were presented the results of the recent audit concerning
e-commerce, conducted by the Czech and German SAIs.
Each EU Member States strives to design its own methods to prevent frauds, also using the experience of other members. The most important aspect is to identify threats and to select the most efficient procedures to counteract.
While preparing the Working Group’s conference, NIK sent a questionnaire to the participating SAIs, which was later the basis for the discussion and its conclusions. In their answers concerning threats most SAIs mentioned various types of tax carousels and invoicing of fake transactions. Several countries also mentioned frauds in the oil industry and low percentage of amounts returned after audits. For instance Estonia pointed out the risk of concealed income even in case of cash transactions. Germany mentioned e-commerce and many unregistered companies that function within it. The relevant procedures still require improvement. Finland noticed that on the one hand electronic registration of VAT facilitates the business, but on the other it also makes it easier to conceal illegal revenue.
All participants of the Warsaw conference agreed that the issue of VAT evasion is very seriously treated by the authorities, and works are being held to improve methods to counteract this occurrence. However efficiency of such actions is yet still disputable.
