The Department of Large Taxpayers (DMC) with Romania’s National Tax Administration Agency (ANAF) fails to meet its purpose, which is to reduce the gap between taxes due and taxes collected, because it wastes resources on activities bringing less money to the national budget or on audits requested by other institutions, the International Monetary Fund (IMF) says in a technical assistance report called “Enabling the Large Taxpayer Office to Reduce the Tax Gap”.
The report says that it is very likely that the efforts made by the DMC are not having much impact on the tax gap, if any. (…) audit resources wasted on nonproductive audits are enormous, says the IMF report.
Among the causes generating this situation is the fact that “about 46 percent of annual DMC audit resources are used on VAT refund issues with material results only in about 10 percent of the conducted audits.”
In addition, IMF says the time used for each audit is excessive compared to international standards. “In Romania a VAT refund audit concerning a large taxpayer takes half a year on average, while in advanced administrations such audits typically take a day or less. The intense attention paid to ANAF audit activities by the Court of Accounts, together with the situation that auditors can be
made accountable personally for any tax shortfall not discovered during the audits.”
The IMF report also shows that around a third of total annual audit resources are used on satisfying audit requests coming from the Court of Accounts, other parts of NAFA, and other authorities; these audits often produce very small results.
According to the document, “the remaining 20 percent of total annual audit resources is mainly focused on audit plans developed ‘bottom up’ (although there is minor ANAF HQ input). This is not a very strategic approach and the results are meager as a result.”