|Concerning member state policy, such a regulation is often huge, thus only some countries of the EU will be considered.
Germany. Control over compliance with tax legislation carried out by the financial authorities of lands that are subordinated to federal department of finance. Financial departments have special control units engaged in controlling large companies, small and medium-sized firms, agricultural enterprises [139, с. 104-105].
The tax authority adopts at its own discretion a decision on appointment of inspection, its timing and volume. Control inspections of the tax authorities are organized on the basis of plans for inspections, quarterly and annually approved by the head of the tax authority. Higher tax authorities do not participate in the drafting of these plans. But they have right to independently carry out inspections of certain taxpayers, what is normally used when checking the largest taxpayers, having branched production structure.
One of features of tax control in Germany is scoring system of tax inspectors. This system helps to conduct official or special supervisions, mainly by the department heads of tax inspections. Depending on the category of each enterprise (based on the classification into large, medium, small and micro, as well as by the industry classification) tax inspector is counted a certain number of points (1 to 8). Thus, for a year each inspector must score at least 34 points, which is the reason for the chief to conclude that an inspector carry out his/her duties.
In the order of appointment of inspection the legal basis of its performance, types of taxes, which are subject to the inspection, and reporting periods covered by the inspection
|are indicated. If in the process of inspection the tax authority comes to the conclusion about the need to control any additional issues, then it issues an additional document to expand the range of inspected issues.
As a rule, notification of upcoming inspections of large enterprises receive 4 weeks before it starts, medium — 3 weeks, small and micro enterprises — 1 week. At the request of the taxpayer date of commencement of the inspection may be postponed under reasonable grounds.
The average duration of inspection is:
— at large enterprises — 25-30 days;
— at medium-sized enterprises — 15 days;
— at small and micro enterprises — 6-8 days [134, c. 57].
As a result of the tax inspection an act is drawn up, which reflects identified facts in the inspection process having essential significance for the taxation of individuals and legal entities, as well as changes in amount of payment of taxes. In the absence of violations, as well as making any changes in the amount of tax obligations, notification of unidentified violations during the process of inspection shall be sent to the taxpayer.
Documentary inspections embrace a relatively small number of enterprises. For example, 30 thousand enterprises out of 160 thousand ones, located in Berlin, inspected annually. In Berlin, there are about 9000 of tax inspectors, out of which 900 ones specialize in documentary inspections). Each year there are 19% of large, 7% of medium and 2% of small enterprises which are under the documentary inspections [134, c. 58].
Order of the Ministry of Finance of Germany from 08.03.81 «On rationalization of selection of taxpayers for control inspections» defines criteria for selection of such taxpayers and singles out two types of selection.
1) Random selection involves the choice of objects to control inspections based on statistical selection. There are the following objectives: to ensure the best possible coverage of the enterprises ; to prevent tax violations by sudden and unforeseen control inspections; to assess the general condition of fiscal discipline on the territory covered by the tax authority due to a representative selection of all categories of taxpayers;
|2) Special selection provides selection of taxpayers which have possible tax violations at the highest level among all information provided for the tax authority.
There is a closed list of factors which influence on the selection of controllable taxpayer.
a) Tax balance has hugely changed in comparison with the previous period.
b) The fullness of the accounting information at the enterprise.
c) Interrelation of contributed private means to development of the enterprise and
d) Information on violations of tax legislation received from other controlling organizations.
e) Sale (purchase) of land parcels, changes in rights to use land in view of the emergence of significant amounts of income (expenses) of enterprises,
f) Other factors [134, с. 58-59].
Great Britain. Control over calculation and payment of taxes shall be conducted by two controlling bodies that are subordinated the Treasury: the Inland Revenue and the Office and excise duties. The first deals with the control of all payments, except for excise tax and VAT, as these functions are entrusted to the second body [139, с. 117].
France. Implementation of inspections entrusted to the tax centers that send notices taxpayers, study submitted voluntarily return. All individuals, regardless of their income are required to submit declarations. Tax inspectors carry out two types of control.
At their workplaces they carry out the work with the declarations (office control). The available information in the database is compared with the submitted declaration. It is often at this stage discrepancies are found, and the inspector addresses the taxpayer, demanding an explanation.
If these explanations do not satisfy the tax administration, it may require additional payments of taxes or contact the other control units to conduct a more detailed inspection. On-site control is usually carried out when there are serious grounds for suspicion of concealment of income.
The taxpayer must be warned of the tax inspection, at least 8 days before such an inspection. Without warning, unannounced inspections may be carried out only if there is reliable information that the company evaded taxes.
|Inspections are usually carried out over three previous years. Special provisions on the frequency of inspections are absent. With rare exceptions, repeated inspections concerning the same period is usually not carried out.
Selection of companies to be inspected is carried on many criteria, based on risk analysis. Firstly, those companies are selected which are potential violators and, secondly, the information is provided by whistleblower.
The duration of inspection procedures depends on the size of the enterprise: for small businesses — no more than three months, for large periods there is no limit of the duration. The term of inspection of private persons may not exceed 12 months.
The relationships between tax authority and taxpayer are built in the form of an exchange of views: each side defends its view. The tax administration is obliged to respond in written form to questions of a taxpayer, the latter can use these answers for its defense [138, с. 124].
Since 1997, France has applied the new procedure «General Inspection of small businesses». Minimum period of the inspection is 2-3 days. Inspectors tend to minimize it, because the arrival of the inspector breaks the normal economic activity of the enterprise. The inspection’s period for small businesses is usually one year. If there is no violations or they are insignificant the inspection is over. In other cases it is possible to inspect two previous years. Any enterprise can be a subject of a thematic inspection when one tax or one of the specific issues is inspected [134, с. 63].
Italy. Inspections conducted by tax authorities in Italy, separated into selective, random and for other reasons (tax importance , a special type of activity, difficulties to control the order of payment of taxes).
The main types of control applied by the tax authorities in Italy:
1) analytical control — tax departaments make adjustments specified in the declaration based on the accounting records and transactions. As a rule, this form of control requires an inspection of accounting records and documentation of the enterprise.
2) Inductive control is carried out, if in a declaration sources of income are not fully indicated, there is no a series of accounting records, there are serious violations of accounting rules.
|3) partial control is carried out directly by the register of taxpayers. An example of a partial control can be the practice of a control of income based on «estimated coefficients of income».
4) shortened control is when detecting a possibility of a taxpayer to pay, exceeding the one indicated in the declaration of income. Tax bureaus are entitled to make the necessary changes to the indicated total revenue [134, с. 60].
Lithuania. Tax control is regulated by law on tax administration .
Some articles are relevant to the institution of exchange of information. Article 26(1.11) provides that «[w]ithin its sphere of competence, the local tax administrator shall perform […] cooperate and exchange information with other Lithuanian tax administrators, state and municipal institutions and agencies in accordance with the established procedure» . Article 29 sets basis for Cooperation with Tax Administrations (Competent Authorities) of European Union Member States. The central tax administrator shall cooperate with the tax administrations (competent authorities) of EU Member States when exchanging information about taxpayers, conducting joint inspections and recovering arrears in payments at the request of the tax administrations (competent authorities) of EU Member States or addressing the said authorities concerning the recovery of arrears in payments. The central tax administrator may exchange any information with the tax administrations (competent authorities) of EU Member States where such information may enable them to effect a correct calculation of taxes and investigate violations of tax laws. Information may be exchanged:
1) on request in a particular case;
2) regularly (automatic exchange of information) without prior request;
3) in cases provided for in agreements on administrative cooperation where the designated institutions are allowed to communicate directly with each other;
4) in cases provided for in agreements on administrative cooperation where an officer of a competent authority of another Member State is allowed to participate in the process of collecting information;
5) by forwarding information, of which its has knowledge, without prior request in at least one the following circumstances: tax is not paid in another Member State or it is paid
|incorrectly; the taxpayer is subject to tax reliefs or is exempt from tax which would give rise to an increase in tax or to liability to tax in another Member State; transactions are carried out between taxpayers in one or several Member States in such a way that tax is not paid in either or both of the Member States; tax may not be paid as a result of artificial distribution of income among associated (related) economic entities; information forwarded to the central tax administrator by the tax administration (competent authority) of another EU Member State has enabled data to be obtained which may be relevant for taxation in the forwarding Member State .
The second aspect of tax control which is registration as a taxpayer is also presented in the law.
Article 40(1.3) sets that «taxpayer must […] register as a taxpayer in accordance with the procedure prescribed by the legal acts, notify in due time and manner about any changes in the data contained in the register of taxpayers». Further articles provide some details concerning the registration.
Last but not least, the last aspect of tax control is tax inspection. Chapter VI sets provisions for tax inspections (articles 114-134). In accordance with article 2(21) of this law, «[t]ax inspection shall mean an inspection conducted by the tax administrator in respect of the taxpayer to control the taxpayer’s compliance with the requirements prescribed by tax laws in the fields of calculation, declaration and payment of taxes and, in the cases prescribed by law, in other fields as well» .
The tax administrator shall be independent in its selection of taxpayers for inspection and shall establish the scope and time of the inspection thereof.
The types of tax inspection shall be as follows:
1) comprehensive inspection, i.e. the inspection of the discharge of tax obligations which includes the verification of correct calculation, declaration and payment of all taxes paid by the taxpayer over a certain period of time;
2) topical inspection, i.e. the inspection of the discharge of tax obligations which includes the verification of correct calculation, declaration and payment of a specific tax (taxes) paid by the taxpayer and administered by the relevant tax administrator over a certain period of time;
|3) operational inspection, i.e. the inspection of the performance of specific obligations by a taxpayer in the fields of accounting, tax declaration, tax payment, registration as a taxpayer, etc.
A tax inspection may be conducted at the tax administrator’s office and/or at the taxpayer’s location.
A comprehensive inspection may be conducted not more than once per year. A topical inspection may be conducted not more than once per six months. Such limitations are not applicable:
1) where a legal person is liquidated or reorganised (subject to bankruptcy or restructuring proceedings);
2) where a taxpayer ceases to be registered as a VAT payer;
3) where a taxpayer submits a request to refund (credit) a tax overpayment (tax difference);
4) in the event of an operational inspection;
5) where a re-inspection is conducted;
6) where a taxpayer requests a certificate on settlement with the budget;
7) where an inspection of the taxpayer is conducted on the instructions of a competent state institution or agency or at the request of a foreign state tax administration (competent authority);
8) where a joint inspection is conducted together with other state institutions and agencies as well as foreign state tax administrations (competent authorities);
9) when conducting an inspection in the cases of calculation of tax based on documents of other state institutions.
A tax inspection at the taxpayer’s location may not exceed 90 days. An additional period of 30 days shall be provided to inspect each branch or representation of a taxpayer with structural units (branches or representations). Taking into account the complexity of inspection, the nature and scope of the activity under inspection, the time limits may be extended by the decision of the central tax administrator for a period not exceeding another 180 days and/or 30 days respectively. The tax inspection conducted at the tax
|administrator’s office shall not be limited in its duration, but the tax administrator must complete it within the shortest objectively possible period of time .