Tax and Customs Administration's policy on misuse and improper use

• Response by the State Secretary for Finance and afterword by the Court of Audit

In recent years the Court of Audit has conducted several audits of the Tax and Customs Administration's approach to preventing and combating misuse and improper use (M&IU) in the field of taxation. The levying of taxes is susceptible to misuse and improper use, because tax liability and the amount to be paid depend on the information provided by taxpayers themselves. In 2001 the Tax and Customs Administration collected over €136 billion in taxes and social insurance contributions.

The audits from 1993 to 2001 covered lottery tax, VAT, taxes on individuals (e.g. income tax and wealth tax), corporation tax and customs activities. In 2001-2002 the Court of Audit investigated the quality of the Tax Administration's overall M&IU policy, focusing on the external transparency of policy and the Administration's ability to adjust policy where necessary.

The audit shows that in recent years the Tax Administration has made significant efforts to control M&IU risks. It is devoting increasing attention to all the elements of M&IU policy recognised by the Court of Audit: policy preparation, regulation, information, audit policy, sanctions policy and evaluation. It is drawing on the experience and knowledge it has acquired to further develop M&IU policy.

The Tax Administration is not yet able to provide information on the costs, results and impact of its various activities in this area. However, increasing information is available on each activity, target group and unit. The transformation of the Tax Administration into an agency is expected to improve the amount of information available on the costs, results and impact of M&IU policy. The Court of Audit would urge the Tax Administration not to lose sight of the importance of qualitative policy information. After all, policy must not just focus on achieving and reporting on the quantitative objectives.

The updating of earlier audits prompts the Court of Audit to ask for special attention to be given to a number of processes which will only bear fruit in the longer term. This includes quality improvements in the field of corporation tax and sound risk selection by Customs.

The Court of Audit notes that reporting on M&IU policy is satisfactory, if the annual account to parliament is taken into account. The Ministry of Finance's annual financial statements alone do not provide sufficiently clear information on the costs, benefits and impact of M&IU policy. The Court believes that the information on the achievement and above all the impact of M&IU policy can be expanded further in the framework of the 'From policy budgets to policy accountability' (VBTB) operation.

Response by the State Secretary for Finance and afterword by the Court of Audit

On 17 January 2003, the State Secretary for Finance replied by letter to the Court's report. He endorses its conclusions and recommendations, but does not fully accept its findings on evaluation and accountability. He believes that there is a multiyear evaluation programme and that the Tax Administration complies with the Order on performance data and evaluations in central government. He says that the Tax Administration concentrates on accounting for implementation processes. For the report on the impact of the Tax Administration's M&IU policy, he refers to the general explanatory notes on the Ministry of Finance's financial statements. He hopes that the introduction of result-oriented management and accrual-basis accounting, in conjunction with VBTB, will strengthen the link made in reports between policy and resources, implementation and impact.

The Court of Audit still believes that a multiyear evaluation programme should be drawn up in a more structured fashion, including the evaluation of implementation objectives.