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Tax payers risk analysis in the Tax


									Simplified Risk Scoring for
   SMEs and basic IT

         May 4 – 6, 2011
         Tbilisi, Georgia
   Segmentation for tax control purposes (1)

For tax control purposes all taxpayers are divided in three groups:
 Large enterprises – turnover in previous taxation year is over LVL 3 million
 Medium enterprises – turnover in previous taxation year is between LVL
  100 thousand and LVL 3 million
 Small enterprises – turnover in previous taxation year is under LVL 100

Segmentation of taxpayers is important for setting up an appropriate type of
tax control that is done according to Tax Control Department “Conditions for
selection of legal persons for planned tax controls”:
 Large enterprises – tax audit or desk audit
 Medium enterprises – tax audit, desk audit or thematic check
 Small enterprises – thematic check or desk audit
  Segmentation for tax control purposes (2)

 Risk analysis process is computerized and standard risk
  criteria are used for evaluation of all taxpayers.

 All tax controls are set up based on the results of
  computerized risk analysis.

 For each taxpayers’ segment specific risk conditions are

Ranking of taxpayers according to assessed risk points – as
 higher risk as higher position.

                       Tax control process

                                                                   Tax control
                                                                                      Work with
                                                               ·Tax audit;         information got
                Risk Analysis                                  ·Thematic checks;      during tax
                                            Setting of         ·Observations;
Collection of                                                                          control
                                           control type        ·Inspections;
information     Selection for
                tax control                                    ·Desk audit

                                                                                   Registration and
                                                                                    analysis of the
                   Request of criminal process driving force
                          (law enforcement bodies)                                  control results
                                                               ·Tax assessment

Selection for the tax control measures
                        Administrative legal approach           Criminal legal

         Risky                     Tax control
       taxpayers                    measures

   Low risk taxpayers

                                            Cancellation from
                                              VAT register,     Finance Police
  “Fictitious” companies                      limitation of         Board
                                            economic activity
            Available information sources

1. Taxpayers' registration information
2. Internal information
     2.1. Information from tax and informative returns
     2.2. Information about various tax administrating activities
     2.3. Information from different SRS departments
     2.4. Information about payments
     2.5. Registry of Fictitious Companies
     2.6. Explanation register
3. External information – third party information
     3.1. Information which is imported in the IT system of tax administration
     3.2. Information which is not imported yet but which can be electronically
        accessed by tax administration via internet

              External information sources (1)
 Registry of Enterprises
 Registry of Population
 State Land Service (Cadastre)
 Land Register
 Banks (information on bank accounts registered by legal persons)
 State Forest Service
 State Company “Latvian Forests”
 State Tractor Registry
 Vehicle Registry
 Shipping Registry
 Aircraft Registry

             External information sources (2)
 Information from Markets
 Information from State Labor Inspectorate
 Information about issued licenses
 VAT information from EU countries (VIES)
 Information exchange system (direct and indirect taxes)
 EUROCANET (European Carousel Network) and EUROFISC
 Information on work permits issued by Ministry of Interior
 Border Guard Information System
 European Business Registry
 AMADEUS data base
 Emission Trading System

           Information systems of
       State Revenue Service of Latvia
Information systems used for storage of data:
 Tax information system
 Central customs information system
 Information system for state officials’ declarations
Information systems and tools used for risk analysis:
 Data Warehouse - information analysis tool
 ESKORT – computerized risk analysis system of legal persons
 RASA – computerized risk analysis system of natural persons
 VIES – VAT Information Exchange System between EU member

             IT systems used for risk analysis
                            IES         VIES                          ESKORT
                                                                   (legal persons)
    Customs                                                                                   RASA
  information                                                                            (natural persons)


                                     Data Warehouse
system for state
                                                                            SRS             External users

                                                                                     State Land Service
                   Tax information
                       system                                                      State Timber Service
                                       Other information sources

              Examples of parameters for audit
                       selection (1)
 Cross-check of the data declared by taxpayer with data declared by other
   taxpayers and with data from other information sources:
       Data on declared VAT turnover are cross-checked with data on deducted VAT input
        tax declared by other taxpayers – business partners
       Data on deducted VAT input tax are cross-checked with data on sales declared by
        other taxpayers – business partners
       Data on transactions made with risky business partners (de-registered from VAT registry on
        the initiative of tax administration, fictitious companies, buffers, criminal case initiated etc.)
 Comparison of the data declared in different tax and informative returns:
       Net turnover declared in Profit and loss statement compared to turnover declared in
        VAT returns
       Number of employees is compared with number of structural units of the company
        and registered cash registers
       Data on export from customs compared to export value declared in VAT returns

            Examples of parameters for audit
                     selection (2)
 Comparison of the financial results of economic activity from different
   periods and economic branches:
       Taxpayers operating more than two years with losses
       Comparison of the value of cost-benefit ratio for each economic branch
        (statistical data) with each taxpayer’s ratio
       Comparison of the value of average monthly salary for each economic branch
        (statistical data) with each company’s data on average monthly salary
 Comparison of data declared by taxpayer with data provided by third parties:
       Data from Markets is used to discover undeclared turnover, use of
        unregistered labor and “black” salaries
       Data from State Labor Inspectorate is used to discover use of unregistered
    Tax audit coverage and effectiveness of SMEs

             Taxpayers’ segment                Taxpayers controlled during
                                                       tax audit*
        Large enterprises                                       10%
        Medium enterprises                                      2%
        Small enterprises                                      0,5%
               * Percentage from total number of taxpayers in certain segment

Average effectiveness of tax audits performed in 2010 is 91%, i.e. in 91% of
cases audited additional tax assessment has been made.


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