Excise duty control - mostly advertising RiR 200610 Summary by ack15378


									RiR 2006:10 Summary

Excise duty control - mostly advertising

Excise duties are special sales taxes on specific goods and services, such as
energy, alcohol, tobacco and advertising. Not only do the excise duties
provide a means whereby the state can influence patterns of consumption
and production, they also represent an important source of income to the
state. The income that the state receives from excise duties amounts to
approx. 7 % of total tax income in Sweden. . In recent years the excise duties
have brought in between SEK 85 000 and 90 000 m annually. Energy tax,
alcohol tax and tobacco tax are the excise duties of most importance to the
government’s finances. In 2004, energy tax accounted for around SEK 65 000
m of the total revenue from excise duties. In addition the energy taxes are
legally complicated. They were followed by alcohol tax and tobacco tax,
contributing approx. SEK 10 000 m and 8 000 m respectively to total excise
duty revenue. Other excise duties are therefore of very modest importance to
the national budget. For example advertising tax accounted in 2004 for about
SEK 1 000 m of total excise duty revenue. The number of taxpayers in the
excise duty field is relatively small relative to other tax areas. In 2004 those
registered as liable for tax totalled approx. 8 000 businesses, roughly half of
them being registered for advertising tax.
    The Riksdag and the Government require taxes and charges to be secured
in a legal and financially efficient manner at the same time as simplicity is to
be sought and criminality prevented. Compliance checks, which are one of the
Tax Agency’s instruments for ensuring attainment of the goals of the Riksdag
and the Government, are intended to prevent and remedy errors and fraud so
that the state receives the expected revenue.
    The Swedish National Audit Office (SNAO) notes that the Government
has not pronounced specifically on the purposes and nature of excise duty
control. Instead the Government issues general directives on the nature of
general tax control. These directives are to some extent contradictory. The
Government has not set targets with regard to giving priority to large
companies, international transactions and economic crime in the Tax
Agency’s appropriations directive. These targets have been stated by the
Riksdag and the Government in committee reports and budget bills. In the
excise duty area there are a number of companies with very large tax bases for
taxes of major budgetary importance. The SNAO therefore considers that the
Government ought to have specified precisely the policy towards major
companies in the Tax Agency appropriation directive. In the context of the
Government’s general goals for tax compliance the Tax Agency should on its
own account set goals capable of being monitored and decide how feedback
on these can be achieved. The Tax Agency has not given any specific
information on excise duty control in its annual report since 2003.
    The SNAO recommends the Government to formulate goals for checking
tax compliance in the Tax Agency’s appropriations directive consistent with
the recommendations of committee reports and budget bills. In addition the
Government ought regularly to request feedback from the Tax Agency and
supply information to the Riksdag on the development and result of excise
duty controls.
     The overall question in the SNAO´s audit is whether the Tax Agency is
carrying out excise duty control in a manner sufficiently effective to keep the
risk of major loss of tax revenue to a minimum. The SNAO notes that the Tax
Agency has not reported any strategy clearly focused on excise duty control.
Moreover the National Tax Agency lacks knowledge of the size of the “tax
gap” (the difference between the assessed amounts of tax and the tax that it is
possible to charge according to fiscal law) in the excise duty field. The
National Audit Office also notes that the National Tax Agency’s monitoring of
excise duty control is inadequate. Limitations and shortcomings in the Tax
Agency’s present IT support for excise duties result in that the outcome of the
extended form of checking known as “desk check” cannot be reliably
assessed. The monitoring of excise duty audits also shows failings. The
failings in the Tax Agency’s monitoring of excise duty control mean that the
authority lacks appropriate information for determining priorities. The SNAO
does not consider the Tax Agency’s internal management of excise duty
control suitable for its purpose. This gives rise to a risk that the Tax Agency is
not carrying out its excise duty control effectively. This means that the Tax
Agency is not reducing the risk of major loss of tax revenue in the excise duty
    The SNAO therefore recommends the National Tax Agency to devise a
coherent and clearly focused strategy for excise duty control. As a basis for
such a strategy the Tax Agency should prepare current calculations of the size
of the tax gap in the field of excise duties. The Tax Agency ought also to
compile reliable total statistics from the data from its checking of each
specific excise duty. The National Audit Office also recommends the Tax
Agency to supply the excise duty control function with practical IT systems for
case processing, risk analyses and monitoring and also to improve its time
    The SNAO also queries the efficiency of the Tax Agency’s organization of
excise duty control. Responsibility is at present divided between the Large
Companies Tax Office’s Ludvika unit (the Excise Duty Office) and the audit
units in Stockholm, Gothenburg and Malmö. These units are unable to
choose between desk checks and tax audit as forms of control, which reduces
the flexibility of the control. It has also emerged that 41% of the Excise Duty
Office’s recommendations of tax audits do not lead to a tax audit at all.
    The SNAO therefore recommends the Tax Agency to create forms of work
that permit the use of the most practical form of control. Furthermore the Tax
Agency ought to improve coordination between the units within the authority
that work with excise duty control.
      The SNAO also questions the actual priorities chosen by the Tax Agency
for audit work in the excise duty field. This is because the authority has
attached comparatively great importance to the control of advertising tax and
little to the control of energy tax. Bearing in mind the fact that in the case of,
for example, energy tax large companies account for more than 90 % of the
total excise duty collected, the SNAO believes that there is a risk that the
Government’s large income flows in the excise duty area are not being
adequately checked. It has also emerged in the course of the audit that the
proportion of tax audits that do not lead to proposals for tax amendments
(zero audits) is higher in the excise duty field than in other tax areas. The
SNAO considers that the high proportion of zero audits indicates an
inefficient use of the Tax Agency’s most ponderous and resource-demanding
form of compliance check.
     The SNAO recommends the Tax Agency in its planning and selection
processes in the excise duty field to place greater emphasis on taxpayers who
handle large tax bases with regard to excise duties of importance to state
finances where legislation is complicated. The Tax Agency should also attach
greater importance to risk analyses and systematic planning generally. For an
efficient use of resources the authority should also investigate the causes of
the high proportion of zero audits in the excise duty area.

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