Intra-Community VAT fraud. Joint follow-up report

Report ID: 17

In 2009, the courts of the Netherlands (Algemene Rekenkamer), Germany (Bundesrechnungshof) and Belgium examined the treatment of intra-Community VAT fraud. As part of this audit, which was carried out in parallel with the Netherlands, Germany and Belgium, the central question raised was whether the tax authorities had sufficient resources to deal with this fraud. In the first part, the audit examines the measures available to the authorities to prevent malicious people from setting up fraud (prevention) systems. The audit then examines the available measures to detect and dismantle existing fraud schemes (detection). Finally, it analyzes whether the infringements found (and how many) have led to an effective recovery of the amounts of VAT due, arrears and fines (repression).

As part of a follow-up audit carried out in 2011-2012, the three courts examined the efforts made by the national administrations to implement the recommendations made in 2009.

The Court of Auditors acknowledges that the administration has taken initiatives to implement a number of recommendations. Thus, companies that file only "nil" statements are now being investigated more quickly.

In the area of ​​fraud prevention, efforts are still needed to make it possible to use the background information when assigning a VAT number. The Court also encourages the administration to intensify its efforts within the Benelux to formulate proposals for a uniform European policy on registration and cancellation.

EUROSAI Audit on Climate Change

Report ID: 22

The aim of the audit was to assess the actions taken in the States of the Cooperating SAIs to implement the provisions of the United Nations Framework Convention on Climate Change, the Kyoto Protocol to this Convention, Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community and the requirements of the national legislation, in the scope of:

• the performance of observations on climate change and its effects,
• actions taken to mitigate climate change,
• forecasts and assessments of the actual anthropogenic greenhouse gas emission and absorption levels,
• reporting on the scope of the actions taken and planned to be taken in order to mitigate climate change and the achieved effects of these actions.

The audit demonstrated that in the period 2006 – 2008 in all the States of the Cooperating SAIs climate change observations were performed, covering climate variables and including analysis and interpretation of the research results. The scope and frequency of the research carried out in the individual States was different, but in all of them the basic climate variables were tested. The observation results were published in the reports of government agencies and statistical reports and they were also placed on the websites of the competent government institutions or meteorological services. All the States were involved in international cooperation in the scope of research and an exchange of observation data, e.g. through their participation in international networks and research projects, their work at the technical commissions of the World Meteorological Organisation and training courses. Climate change observations were funded with financial resources from the state budget, national, other than budget resources and international funds.

In all the States of the Cooperating SAIs, measures were taken to mitigate climate change through the limitation of their greenhouse gas emissions and the enhancement of the capacity of the sinks and reservoirs of these gases. Bodies responsible for taking measures to mitigate climate change were established. In 8 States, national and sectoral strategies, programmes or action plans necessary to stabilise and limit greenhouse gas emissions were prepared and in 2 States their preparation began. In 7 States the greenhouse gas emissions were reduced by 30% - 53% with respect to the base year (under the Kyoto Protocol: 1988, 1990, 1995 or 2000, depending on the State) and in 1 State the emissions grew by 85.3%. The per capita levels of anthropogenic greenhouse gas emissions varied between 5.1 – 16.4 Mg CO2e.

In the EU Member States, the provisions of the Emissions Trading Scheme Directive were implemented. National emission allowance allocation plans were developed, an emission allowance trading scheme was established and the required registries were kept. Among the 6 States of the Cooperating SAIs which were not EU Member States, emission allowances were traded pursuant to the Kyoto Protocol only in 1 country.

6 States of the Cooperating SAIs – Azerbaijan, Cyprus, Denmark, Israel, the former Yugoslav Republic of Macedonia and Switzerland – were involved in the implementation of Clean Development Mechanism (CDM) projects, whereas 5 of them – Denmark, Estonia, Poland, Russia and Ukraine – participated in Joint Implementation (JI) projects. The international cooperation in the field of the mitigation of climate change effects also included the implementation of educational projects, support for legislative activities and participation in the working groups of international agencies. The activities within the framework of international cooperation were funded with national resources and those from international financial institutions, such as the World Bank and UNDP.

In all the States of the Cooperating SAIs, the measures to mitigate climate change were monitored.

The required reports were prepared and submitted to the UNFCCC Secretariat and the European Commission. Certain reports were submitted with a delay.

Administration of the Value Added Tax

Report ID: 35

Objective of audit:

(CZ) The objective of the audit in the Czech Republic was to review the procedure used by financial authorities in administrating value added tax following integration of the Czech Republic into the common internal market of the European Community (hereinafter “EC”), connected with free movement of goods and services, and to review the use of the VIES1, particularly monitoring the exercise of the right to exempt intra-Community deliveries from value added tax.

(D) The objective of the audit was to review the system of intra-Community VAT control with a special focus on administrative cooperation in the field of VAT according to the above mentioned regulations. As a result of this, weaknesses should be reported and recommendations be developed to address the problems stated.

The audits were performed by the Supreme Audit Office, Czech Republic (hereinafter the “SAO”) and by the German Bundesrechnungshof (hereinafter “BRH”) in mutual cooperation on the basis of an agreement concluded between the two audit institutions on June 8, 2006. The cooperation primarily concerned the review of selected commercial transactions between taxpayers from the Czech Republic (hereinafter “CR”) and from the Federal Republic of Germany (hereinafter “Germany”), use of information obtained via international cooperation between tax administrations and comparison of the VAT administration systems in the two countries.

Based on an agreement between the two SAI the parallel audit on the administration of VAT in the CR and Germany was carried out. Besides the main point – exchange of information based on the Council Regulation (EC) No 1798/2003 and the Commission Regulation (EC) No 1925/2004 – the audit covered other topics as for instance the registration of taxpayers, VAT returns and recapitulative statements that are closely linked with it. Additionally, the legal situation in terms of international bus transportation of passengers and the comparison of certain statistical data were part of the audit.

By comparing the systems of administration of VAT in the two countries differences were found in the following areas:

1. Registration for VAT
2. International bus transportation of passengers
3. VAT returns
4. Recapitulative statements
5. International exchange of information in the area of VAT
6. Risk management

As part of cooperation, the two SAI reviewed selected cases of intra-Community transactions processed by tax entities in theCR and Germany. Thirty-one cases of business transactions were reviewed jointly using the legal provisions of the CLO, where there were doubts about their realization, their proper treatment or suspicion of VAT fraud. The SAI found that:

• In some cases, tax offi ces made use of the information obtained via international exchange and have reassessed taxpayer’s VAT liability. In those cases, taxpayers either unlawfully applied the right for exemption of supplies from VAT, or did not declare acquisition of goods in their VAT return.
• In some cases, tax offices could not make use of the information obtained, because the information was incomplete or incomprehensible. In other cases, the information could not be used because of differing legal provisions in both Member States.
• In some cases, the tax administration of another Member State refused to reply to a request for information.
• Some cases were detected, where taxpayers wrongly declared business transactions in their recapitulative statements. As a result of this, data in VIES were erroneous and therefore the tax administrators had to review those cases.

Coordinated audit of the funds earmarked for the funding of projects implemented within the Operational Programme Cross-Border Cooperation the Czech Republic and Poland

Report ID: 40

Both audits carried out by the NKU on the Czech side and by the NIK on the Polish side of the border have shown that the level of identified irregularities did not exceed the materiality threshold. The implementation of the OP CBC CZ-PL, including the management and control system performance and the realization of selected projects, was successful.

Actions taken by the audited entities established within the management and control system, limited the risk of improper expenditure of funds, as well as the possibility of failure to utilize the available ERDF funds. What indicates the effectiveness of the operations carried out within the Operational Program is a high level of achievement of the results, which was also confirmed by the social evaluation of projects´ completion.

The audit of EU Regional Fund projects focused on the environment and environmentally friendly energy

Report ID: 45

1. This report concerns a coordinated audit performed by National Audit Office of Denmark (Rigsrevisionen) and the Gdansk Regional Branch of the Supreme Audit Office of the Republic of Poland (NIK) on the EU Regional Funds projects focused on the environment and environmentally friendly energy for the programme period 2007-2013.

2. The report contains information about programmes co-financed by the European Regional Development Fund (ERDF) including their administration, control follow-up, and how they are organised in Denmark and the Pomorskie Voivodship (region). The report is based on information gathered from national audits, the internet and other open sources.

3. In February 2010, Rigsrevisionen and the NIK engaged in a coordinated audit of environmental projects accepted to receive grants from the ERDF. The objective of the cooperation was for both Supreme Audit Institutions (SAIs) to gain comparable knowledge about the regional fund and find out whether administration and management of regional fund projects focused on the environment and environmentally friendly energy were adequate in the two countries. This was done on the basis of samples from environmental projects
accepted to receive grants from the ERDF in the period 2007-2009.

4. Furthermore, the purpose of conducting the audit as a coordinated audit was to identify examples of ‘good practice’ on the basis of the audit findings to the benefit of both SAIs and the administrations in the two countries.

5. Rigsrevisionen and the NIK have each performed the audit relating to Denmark and the Pomorskie Voivodship, respectively. These audits have been reported separately to the administrations in the two countries.

6. On the basis of these reports, this joint report with examples of “good practice” has been drawn up. The results of the Danish audit, the conclusions of the joint audit and the examples
of ‘good practice’ will form part of Rigsrevisionen’s report to the Danish parliament on
the audit of EU funds for 2009 while the findings of the Polish audit were included in the information
on the audit results published by the NIK.