According to Kristi Veskus, Head of VAT supervision at the ETCB, the Board primarily proceeds from its advisory role, and this is often enough to put companies on the right path.
“It is encouraging that after we have drawn attention to companies’ tax risks, almost 60 % of them improve their tax behaviour voluntarily, so there is no need to start more thorough investigations,” she said.
The largest number of errors were detected with regard to VAT refund applications, which companies had to correct on more than 1 400 occasions, amounting to a total of 10.6 million euros.
“In terms of the content of the violations, the most common forms of tax evasion are the concealment of supply or the use of fictitious purchase invoices with the aim of paying envelope wages out of the money covertly withdrawn from a company,” Veskus explained. A total of 649 companies that committed such violations were identified in 2022 and their tax liability was increased by 7.8 million euros in total.
Veskus pointed out that, compared to previous years, the use of fictitious invoices issued on behalf of shell companies or invoice mills and the use of other fraudulent transactions in order to reduce VAT liability has decreased somewhat. In 2022, we identified such violations on 370 occasions, which is about 9 % less than the year prior. We increased the tax liability of these companies by a total of 4.7 million euros," she added.
However, in 2022, the ETCB observed an increasing trend of tax evasion by avoiding registering companies for VAT purposes and using fictitious invoices issued on behalf of non-registered persons to withdraw money from companies.
“Therefore, in 2023, we will continue to focus on those companies whose risk characteristics give reason to believe that they may have met the VAT registration threshold and have incurred VAT liability, but have not performed the obligations of a taxable person,” Veskus explained. Additional tax liabilities in the amount of 1.3 million euros were imposed on such companies last year.
Another worrying trend concerns violations related to real estate transactions detected on 225 occasions last year and amounting to 4.7 million euros in value. “This is 24 % more than in 2021, and that’s why this year, we are paying more attention to the risks in this area. This year, we are targeting 619 companies that could cause a VAT loss related to real estate transactions in the amount of 5.5 million euros and who can therefore expect being contacted by the tax authority," Veskus warned.
As of the beginning of this year, the ETCB has mapped nearly 20,000 companies whose declared data reveal potential VAT risks and can cause a suspected tax loss to the state in the amount of 94.4 million euros.
