-fr w -it COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 20.07.1995 
COM(95)354 final 
VAT Collection and Control Procedures 
Applied in Member States 
2nd Article 12 Report 

-2-
VAT Collection and Control Procedures Applied in Member 
States 
2nd Article 12 Report 
INTRODUCTION 
1. The Union System of Own Resources 
LA. Traditional own Resources: Information on collection and control 
procedures and results 
LB. The VAT own resource: Information on VAT collection and control 
procedures and results 
LC. The GNP resource . 
2. The VAT resource 
2. A. The VAT resource and Member States'VAT 
2.B. Effectiveness of VA T procedures and Community finances 
3. Structure and contents of the report 
CHAPTER 1 : FOLLOW UP TO THE FIRST REPORT 
1.1. Summary of the Commission's work programme 
1.2. Summary of suggestions from the First Report 
1.3. Implementation of the work programme 
1.4. Overview of developments in Member States since the First Report 
1.5. Examples of significant initiatives or practices 
CHAPTER 2: CHANGES IN VAT ADMINISTRATION IN MEMBER STATES 
SINCE THE FIRST REPORT 
2.1. VAT in Member States' finances 
2.2. Taxpayer characteristics 
2.3. Functional structure 
2.4. The respective responsibilities of central and local offices 
2.4.1. Central responsibilities 
2.4.2. Local responsibilities 
2.5. Human resources, training and computerisation 
2.6. Cost-effectiveness and equality of treatment 
CHAPTER 3 : PLANNING AND UNDERTAKING VAT CONTROL 
3.1. Introduction 
3.2. Gathering Intelligence 
3.3. Analysing Trader Population for Control Selection 
3.4. Criteria and Decision Rules 
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3.5. Risk criteria -
3.5.1. Financial Risk Criteria 
3.5.2. Compliance record criteria 
3.6. Undertaking VAT control - Some selected examples 
3.7. VAT control in a risk sector 
3.8. VAT control of large traders 
3.9. Controlling specific VAT risks 
3.10. Co-operation with other Member States in planning and undertaking 
control 
3.11. Improving taxable persons rights and access to information 
CHAPTER 4: VAT DEBT MANAGEMENT 
4.1. Objectives 
4.2. Promoting Prompt Payment 
4.3. Clearing outstanding debt and preventing new arrears from getting 
older and cumulating. 
4.3.1. Recovery maximisation and Equal Treatment 
4.3.2. Obtaining detailed information on the debtors financial situation 
4.4. Enforcing debts 
4.5. Arrangements for Delaying Payments 
4.6. Irrecoverable cases 
CHAPTER 5: MONITORING AND EVALUATING VAT CONTROL AND DEBT 
MANAGEMENT 
5.1 Introduction 
5.2 Measuring and monitoring general vat compliance and costs 
5.3 Specific performance indicators and targets 
5.4 Recording and Monitoring VAT Control Work and Debt Recovery 
5.5 Measuring the impact of changes in procedures on compliance and 
costs 
CHAPTER 6: CONCLUSIONS 
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VAT REPORT 
INTRODUCTION 
1. THE UNION SYSTEM OF OWN RESOURCES 
The Community own resources Decision1 stipulates that own resources are 
constituted by the revenue from 
i) agricultural and sugar levies; 
ii) customs duties; 
iii) "the application of a uniform rate[...]to the VAT assessment base which is 
determined in a uniform manner for Member States [not exceeding for any 
Member State 55% of its GNP]" 
iv) "the application of a rate to the sum of all Member States' GNP (Directive 
89/130 2). 
The relative shares of each resource in Community finances is illustrated in Table 1). 
Own. resources arising from VAT remained the main own resource for the 
Community in the three-yearly period covered by this report. Table 2 shows the 
amounts of VAT resource paid by Member States to the Community budget. 
LA. Traditional own Resources: Information on collection and control 
procedures and results 
Traditional own resources (items i and ii above) are levied by Member States 
on behalf of the Community. The rules for determining the Community 
entitlements pursuant to these resources is laid down in Council Regulation 
1552/893. Regulation 1552/89 also defines the reports and information that 
Member States shall send to the Commission to enable it to exercise its powers 
and responsibilities in managing the own resources system. 
1 Council Decision (88/376/EEC, Euratom) OJ L185/24 of 15 July 1988 on the system of the 
Communities' own resources. According to the new OR Decision of 31 October 1994 (Council 
Decision 94/728/EC, Euratom) the ceiling on the uniform rate will be reduced from 1.4% to 1% in 
equal steps between 1995 and 1999. Also for countries with a per capita GNP of less than 90% of the 
community average the assessment base for VAT would be limited to 50% of their GNP, rather than 
55% as at present, as from 1995. For the other Member States this change would be phased in, in 
equal steps, over the period 1995-1999. 
2 Council Directive (89/130/EEC, Euratom, OJ No. L 49/26 of 21 Febniary 1989) of 13 Febmary 1989 
3 Council Regulation n° 1552/89 (EEC, Euratom, OJ No. L 155/9 of 7 June 1989) of 29 May 1989 
implementing Decision 88/376/EEC, Euratom on the system of the Communities' own resources. 
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l.B. The VAT own resource: Information on VAT collection and control 
procedures and results 
As defined in Council Regulation 1553/89 of 29.5.1989 the VAT. resources 
assessment base is calculated by dividing the total net VAT revenue collected 
by a Member State during that year by the [weighted average] rate at which 
VAT is levied during that same year4. 
Regulation n° 1553/89 in its Article.12 also lays down that: 
"1. The Member States shall provide the Commission with 
information concerning the procedures which they apply for 
registering taxable persons and determining and collecting 
VAT and on the modalities and results of their VAT control 
systems. 
2. The Commission shall consider, together with the Member 
State concerned, whether improvements to these procedures 
can be contemplated with a view to improving their 
effectiveness. 
3. The Commission shall produce a report every three years on 
the procedures applied in the Member States and on any 
improvements contemplated.5" 
In adopting this Regulation, the Council made the following statement: 
"The Council notes that the Commission intends, by the 
procedure proposed, to help overcome practical difficulties in 
the VAT collection and, through better circulation of 
information, to help the national authorities to combat cases, 
of fraud and irregularities involving VAT. The Council 
considers that this represents a constructive step in the 
strengthening of fraud prevention measures." 
A first report was produced in February 1992. 6 
l.C. The GNP resource 
Directive 89/130 (the GNP Directive) lays down (Art. 3 par. 1) that Member 
States produce yearly their GNP according to the common definitions and 
rules contained in the same Directive (Arts. 1 and 2). Member States must also 
provide the Commission with the information necessary to show how GNP and 
its component elements have been derived (Art. 3 par. 2, Arts. 4 and 5). 
4 Council Regulation (EEC, EURATOM) n° 1553/89 of 29 May 1989 on the definitive uniform 
arrangements for the collection of own resources accruing from VAT. Articles 3 and 4 of this 
Regulation (OJ N° L155/9-13 of 7.6.89) refer. 
5 Ibid., art. 12 
6 SEC(92)280 Final 
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The Commission is responsible for the verification of national GNP 
calculations, with the assistance of a management committee, chaired by a 
Commission representative. In this committee questions relating to the correct 
implementation of the Directive, statistical sources, GNP calculation methods 
and the measures for enhancing exhaustiveness and comparability are 
examined. 
2. THE VAT RESOURCE 
2.A. The VAT resource and Member States' VAT 
Following the calculation method stipulated in Article 1 and specified in 
Articles 3 to 6 of Regulation 1553/89 Community revenue accruing from the 
VAT resource shall be calculated by applying a uniform rate to the VAT base 
determined in accordance with this Regulation. 
Except for deviations arising from namely capping, certain derogations under 
art. 28 of the sixth Directive, and special schemes for small undertakings, the 
VAT base is proportional to VAT revenue where the factor of proportionality 
is determined for each Member State by the inverse WAR 7. 
2.B. Effectiveness of VAT procedures and Community finances 
Member States have a clear incentive to enhance the effectiveness of their 
registration, collection and control procedures since such initiatives will lead to 
higher compliance levels, increased revenue, and to improvements in 
administrative cost effectiveness. Enhanced effectiveness influences revenue 
both directly through short term yield and longer term via the deterrent effect 
that efficient administrations have on potential frauds and irregularities. 
As stated in the Commission's first report divergences in national VAT 
administrations' effectiveness in collecting the tax and preventing fraud can 
distort the burden sharing of financing the Community budget in a number of 
ways, 
- For example low efficiency in registration, collection, and control 
procedures could result in a revenue shortfall and, therefore, in a shortfall of 
the VAT resource. The shortfall must be compensated for with an increased 
call on the GNP resource, thus altering the relative shares of the VAT and 
the GNP resources. The additional call on the GNP resource is financed by 
all Member States. The consequences of low efficiency in one Member 
State are therefore partly shifted to the other Member States in the 
form of increased VAT and GNP payments. The shifting proportions 
vary according to each Member State's share in the VAT base and in GNP. 
- The efficiency of VAT collection and control on import transactions is also 
correlated with that of collection of traditional own resources. A 
7 Weighted average rate is referred to in Art. 4 of Regulation 1553/89 
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reduction in VAT frauds and irregularities for imports is likely to result in 
increased revenue from customs duties and agricultural levies. 
- Where tax statistics are used in order to estimate GNP, inefficiencies in 
VAT collection and control might have an effect on the calculation of the 
GNP basis. 
- As described above, VAT assessment bases are capped where they exceed 
55% of the Member State's GNP. If a Member state's GNP is understated 
because underground activity is insufficiently taken into account, then its 
VAT base may wrongly be capped. These possible capping distortions 
could also induce shifts in the relative burden of Member States. 
Delays in collection as well as overuse of arrangements that defer the 
payment of VAT debt might also introduce distortions. If a VAT debt 
accrued in one year is collected one or more years later, then VAT 
assessment bases might vary unpredictably. To the extent that VAT bases 
are close to the capping threshold, late collection may also lead to 
unwarranted capping and hence to reduced VAT resource revenue. 
The Commission, which is entrusted with the monitoring of transposition of 
Community legislation into national provisions, must therefore see to it that 
equivalent, high levels of administrative effectiveness are achieved by all 
Member States so that the distortions in the burden sharing resulting from 
differences in performance are reduced to a minimum. 
STRUCTURE AND CONTENTS OF THE REPORT 
This report is organised as follows. Having examined above the relevance of the 
efficiency of VAT procedures for own resources Chapter 1 reviews the conclusions 
and follow up plan of the first report, and compares the evolution of Member States' 
VAT procedures by reference to them. 
The first report recognised the importance of the economic and institutional 
environment for the structure and operations of the various VAT procedures. 
Chapter 2 examines the evolution of some major indicators of Member States' VAT 
populations and of their administrative structures over the period 1992-1994. 
While recognising the importance of all VAT procedures, the present report focuses 
the attention on the planning and undertaking of two of them: control (Chapter 3) 
and debt management (Chapter 4). These activities represent the core of VAT 
administration, and in these areas important developments have been achieved in 
recent years. 
In order to ascertain that the changes introduced in administrative procedures 
actually produce the expected efficiency improvements Member States are 
increasingly equipping themselves with evaluation and monitoring systems. Chapter 
5 reviews these systems as they are applied to VAT control and debt management. 
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Chapter 6 concludes with a brief overview of the possible evolution of the legal and 
institutional framework, advances a series of suggestions and, outlines a work plan 
for the next three years. 
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CHAPTER 1 
FOLLOW UP TO THE FIRST REPORT 
l.l. SUMMARY OF THE COMMISSION'S WORK PROGRAMME 
In the first report the Commission proposed a five point workplan. It was proposed 
that: 
i) Member States would regularly advise the Commission of changes to and 
results of their collection and control procedures (including specific measures 
against fraud); 
ii) similar to point (i) the Commission would make regular reports to the Member 
States; 
iii) the Commission would with the relevant Member States' agreement, distribute 
specific documentation and information received that could in its opinion 
contribute to improvements in other Member States; 
iv) the Commission would hold regular meetings with Member States to consider 
jointly the measures implemented following point (iii) above; and 
v) the Commission would organise seminars where considered appropriate to 
foster closer co-operation between Member States' Administrations and to 
promote a complete understanding of their respective procedures and practices 
1.2 SUMMARY OF SUGGESTIONS FROM THE FIRST REPORT 
The report identified a number of suggestions that were summarised as follows: 
One Objective: Enhance voluntary compliance 
Four ways: - Reduce compliance costs (in particular through simplification) 
- Strengthen information and service to the taxpayer 
- Diversify audit programmes with both risk-led and broad visit 
plans 
- Further develop flexible, agile debt collection procedures 
Three rules: - Comprehensive, balanced computerisation plans 
- Reinforced staff training programmes 
- Geographical and functional co-ordination between tax 
services within and across Member States 
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Detailed suggestions were made in the following five main areas: 
a) measures to promote taxpayer's voluntary compliance by minimising their 
compliance costs and giving them an image of commitment to a fair and 
efficient service; 
b)that the various enforcement measures should be oriented towards re­
establishing voluntary compliance; 
c) that computerisation should gradually be applied to all procedures along the 
chain from registration to payment collection; 
d) that there should be re-organisation and rationalisation of registration and 
audit procedures by co-ordination with other fiscal administrations, 
government departments and public enterprises; and 
e) staff training programmes should be oriented towards enabling officials to 
keep abreast of changes in the legal and business environment. 
1.3. IMPLEMENTATION OF THE WORK PROGRAMME 
The Commission implemented the work programme by means of seminars, bi-lateral 
meetings and vidéoconférences. It also produced a questionnaire to assist in the 
collection of information for preparation and inclusion in this report. 
The Commission organised four VAT own resources seminars. The first was held in 
Brussels on VAT Debt Management and Enforcement (April 1993). The second was 
held in Bonn on Planning, undertaking and evaluating VAT Control (November 93). 
The third in Brussels was a review of the impact of the 1st VAT report (July 1994); 
and the fourth held in London (October 1994) dealt mainly with delayed payment 
arrangements and with the evaluation of procedures in terms of administrative and 
compliance costs. 
The view of the Commission and Member States is that these seminars have provided 
a useful forum to foster closer co-operation and have presented the opportunity for 
all parties to discuss and exchange ideas and initiatives on good practice. Knowledge 
about practices and procedures has contributed to overall improvements in the 
collection and control of VAT and enhanced the fight against fraud. 
Apart from these seminars, other initiatives also contributed to the achievement of 
. the aims set out in this Report: the Matthaeus Tax Seminars in the field of VAT, the 
regular meetings of the Advisory Committee on Own Resources and the Standing 
Committee for Administrative Co-operation as well as an experiment in the control 
of multinational enterprises can be cited in the respect. 
1.4. OVERVIEW OF DEVELOPMENTS IN MEMBER STATES SINCE THE FIRST REPORT 
Developments in Member States have been in general consistent with the orientations 
identified in the First Report, and even fully consistent for some of them (F, UK). 
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A good example is the dynamic area of computerisation where many large networks 
with modern audit software and sophisticated control programmes have been 
installed. The use of personal computers has sharply increased in the last two years 
with several Member States (D, DK, E, F, I, UK) equipping a large number of 
inspectors and audit staff with them. Luxembourg is actively planning their 
introduction for 1995. 
The field of measures to promote voluntary compliance (see 1.2.(a) above) and in 
particular with regard to the simplification of procedures is one area where less 
improvement has been achieved. Two Member States (D, E) stressed the difficulties 
to minimise the number of changes to legislation given the need to adjust to changes 
in Community law. For the same reason Portugal stated it would find it difficult to 
group amendments. Reluctance was expressed by the United Kingdom and Ireland 
about establishing co-operation arrangements with professional associations 
concerning VAT registration formalities. They did not wish to delegate the right to 
refuse registration to an authority outwith their administrations. Such delegation was 
not provided in P, either. Germany stated that multi purpose forms, in order to be 
acceptable, should be clear to avoid confusing tax payers. 
Portugal reported that revenue collection by financial institutions or post offices was 
not possible within its current legislation, Luxembourg pointed out that no 
competence has been attributed to such bodies. 
The suggestions on enforcement methods (see 1.2.(b) above) were generally found 
by Member States to be in line with their current practices. The delegation of minor 
arrears collection to private collection companies was considered inappropriate by 
several Member States (E, DK, F, GR, P). Spain reported that while it did so in the 
past that it had recently taken over collection from private firms. By contrast those 
Member States who have adopted this suggestion find the arrangement satisfactory 
(I,ERL). 
In the area of computerisation (see 1.2.(c) above) the Commission's orientations 
were fully in line with Member States' developments or plans. The United Kingdom 
reported that whilst it had no specific plans regarding a single identification code for 
traders it was creating a unique number for all those under Customs & Excise 
responsibility. 
Member States reported that they were in line with the orientations in the areas of re­
organisation and rationalisation of procedures and staff training. 
1.5. EXAMPLES OF SIGNIFICANT INITIATIVES OR PRACTICES 
Several Member States reported initiatives or practices which are worthy of note 
some of which will be presented in more detail in the following chapters. 
Legal data bases 
Legal data bases have been developed which contain a wide range of advice 
and legal precedents. They operate on a subscriber basis and are used 
extensively by practitioners who tend to be the main interface between the tax 
payer and the Administration (D, F). 
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Multi-tax control 
It is widely recognised that problems in one tax area often have implications 
for another. Joint control of taxes enables inspectors to have a global picture 
when auditing or inspecting businesses and this has been reported to improve 
allocation of control staff resources (DK, D, F, IRL, NL). A joint tax approach 
has also been reported useful in offsetting debts from one tax area against 
repayments in another. Belgium is currently planning to merge the 
administration of VAT and direct taxation; this should facilitate the 
development of multitax control. 
Enforcement 
Two very proactive control practices were reported: 
i) Administration staff will often contact businesses by telephone when a 
payment of tax is not received timeously. If the explanation given is 
not sufficient recovery action is initiated immediately (DK, UK). 
ii) For certain types of businesses where there are persistent enforcement 
problems the administration may consider instructing public bodies to 
withdraw their special authorisations without which they may not 
trade (D, DK). (See chapter 4). 
Simplified collection methods 
A system to facilitate tax payments either directly to the central bank (F) or 
through financial institutions which in turn forward the tax directly to the 
central bank is operating in several Member States (E, IRL, I, L) in order to 
simplify the collection procedures and to ensure that taxes are brought to 
account more swiftly. (See chapter 5). 
Payment by credit card 
The acceptance of payments of tax liabilities by credit card to foster prompt 
payment is currently being considered by Italy. 
Computerisation 
France has a national real time system (MEDOC) for the control and 
management of taxes thus ensuring that information concerning traders is as 
up-to-date as possible and is available to staff at a local level. 
Computer software which is capable of measuring costs of control and thus 
influencing the use of resources in the most effective manner is used by several 
Member States (E, P, UK). In most cases there is a range of performance 
measures and indicators in use. (See chapter 5). 
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CHAPTER2 
CHANGES IN VAT ADMINISTRATION IN MEMBER STATES 
SINCE THE FIRST REPORT 
2.1. VAT IN MEMBER STATES' FINANCES 
A review of the relative proportion of national tax revenues contributed by VAT 
indicated that VAT's share in national tax revenue was in 19928 highest in Greece 
(26%), Ireland, United Kingdom (over 20%) and lowest in Italy (under 15%). Given 
that the level of fiscal effort (taxes and social charges as percentage of GNP) ranged 
from 34% in the United Kingdom to 48% in Denmark and Luxembourg, VAT 
collection as percentage of GNP was highest in Greece and Denmark (10,7% and 
9,3%), whereas in all other Member States it remained below the 8% level. [Table 3] 
2.2. TAXPAYER CHARACTERISTICS 
The First Report recognised that the structure and effectiveness of VAT 
administration are greatly influenced by the characteristics of the taxpayer 
population. This is why the main characteristics rendering administrations' 
performance easier or more difficult are taken up again, notably the number of 
taxpayers, their size, their business activities and their geographical distribution. 
The number of traders registered for VAT purposes has increased in all Member 
States since the first report (Table 16). Consequently, tax administrations have to 
face â continuous process of adaptation to optimise the use of their resources. 
Compared to the situation reviewed in the First Report the size distribution of firms 
has most significantly changed in Belgium, Italy and the United Kingdom as well as 
in Germany due to the reunification. Belgium has increased its relative shares of both 
micro-sized firms and large firms. Italy has had a reduction in the number of small 
enterprises. In Italy the number of micro-sized firms has reduced as well, relatively 
easing the administration of VAT. The United Kingdom has significantly increased its 
relative share of micro-sized firms; the number of taxable persons has been low. (See 
Table 4). 
The proportion of businesses in "sensitive"9 sectors which are difficult to administer 
although diminishing in most Member States (most remarkably in NL, but also 
significantly in D and L), has slightly increased in the United Kingdom. The 
percentage of "sensitive" firms remains highest in Italy (82%) with Belgium, Spain, 
Luxembourg, Portugal, and United Kingdom showing levels around 75%. On the 
1991 forDK, GR, IRL, L, P 
Categories 5, 6, 7 and 9 of NACE have been considered "sensitive" sectors. These include buildings 
and civil engineering; distributive trades, hotels, catering, repairs; transport and communication; other 
services. See Tables 4,5. 
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14 
contrary, both the Netherlands (60%) and Germany (66%) have a relatively large 
"non-sensitive" taxpayer population (see Table 5). The turnover breakdown between 
"sensitive" and "non-sensitive" sectors may have still more relevance. Amongst those 
Member States where data are available (B, DK, D, F, I, P), Denmark shows the 
highest concentration of turnover in "sensitive" sectors (64%) followed by Belgium 
and Italy, the remaining three showing ratios of 50% or less. 
2.3. FUNCTIONAL STRUCTURE 
As already stressed in the first report, there remain differences in tax administrations' 
functional structure. However, there seems to be a tendency in Member States to 
unify direct tax and VAT tasks in one department (D, DK, E, IRL, I, NL, planned in 
B). 
In relation to the apportionment of responsibilities for transactions depending on 
their origin (domestic, intra-Community or third countries) the same administrations 
and departments are competent for administering registration of taxpayers, tax 
assessment and control. However, certain Member States have provided the 
intervention of special services and units for VAT on imports (E, F, IRL, I, NL, P). 
The Netherlands have also created a central unit supporting the control of intra-
Community transactions. 
Concerning recovery and enforcement, the use of specialised services and 
departments has been increased in Member States. In Italy arrears enforcement is 
now delegated to factoring companies ("concessionary"). 
2.4. THE RESPECTIVE RESPONSIBILITIES OF CENTRAL AND LOCAL OFFICES 
The trend to apportion more responsibility from headquarters to local VAT offices 
these being nearest to the trader and his socio-economic field of activities, is 
indicated in Table 6. 
Most Member States centrally formulate their annual statements of priorities, 
establish national objectives, and provide technical guidelines and computer support 
to local managers. However, increasingly debt enforcement decisions and the choice 
of those taxable persons to be controlled and the duration and depth of the control is 
being left to regional or local managers. 
2.4.1. Central responsibilities 
A number of key roles are centrally administered in most Member States which 
include 
- The determination of the national control resource available (e.g. an 
assessment of the available working capacity) and the manner in which it 
will be allocated to different regions (e.g. number of taxpayers per region). 
- Making available general methodology guidelines, e.g. highlighting 
developments such as the opening of fiscal frontiers on 1.1.93 (F), and other 
economic or legal developments. 
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- Monitoring the quality and effectiveness of the regionally undertaken tax 
collection and control procedures (see chapter 5). 
-• Determining the broad sectors and activities that control should concentrate 
on (E, I). Trade sectors particularly susceptible to fraud or that have a 
strategic economic importance (e.g. banks in D) are identified. Identified 
trade sectors are also closely monitored regarding debt collection (see 
chapter 4). 
- Planning nationally a-proportion of the control resource to be used to check 
taxable persons undertaking intracommunity transactions (B, I), or to give 
central advice for local controls (F). 
- Setting up teams with expertise in areas such as monitoring and combating 
tax fraud. This role might involve 
- gathering all documentary evidence on fraud 
- co-ordinating measures for investigating and following up cases 
- taking direct action in serious cases of persistent fraud 
- and co-ordinating and establishing the criteria that might be used in 
inspection measures regionally or locally to uncover fraud. 
In this regard France produces annually a comprehensive overview of the 
various types of fraud coming to the attention of the departments 
responsible for control. Each year about 100 entries on fraud techniques, 
most relevant to VAT, are produced. In Greece special attention is given to 
taxable persons who have established false invoices. Once detected they are 
centrally listed and communicated to all regional control services. 
2.4.2. Local responsibilities 
The key responsibilities exercised by the centre in the Member States are 
nevertheless being increasingly matched by the responsibilities at the regional 
or local level. The increased delegation of responsibilities has arisen as 
Member States recognise the value of planning and undertaking control and 
enforcement tasks closer to the taxpayer. In doing so they have capitalised on 
the opportunities offered by the many recent technical advancements in 
computerisation, which make co-ordination easier. 
Even in those Member States where the degree of centralised planning is the 
most significant there is always an important role for the regional offices such 
as: 
- The selection regionally or locally of local programmes or taxable persons 
using local research and the knowledge of the local officials. Such 
programmes are intended to reflect the specific characteristics of taxpayers 
in respective areas. Local and regional selection programmes are often be 
joined with any central programmes prior to the issuing of an agreed 
'national plan' (E). 
- in circumstances where a list of taxpayers is provided to local managers for 
control (either on the basis of statistical/economic reviews or returns 
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checking) or for enforcement most local offices retain a considerable degree 
of autonomy in determining cases to be persued (B, GR). 
- Decisions on arrangements to delay payments up to a certain level (see 
chapter 4). 
- In some Member States (D, DK, F, NL, UK) there exists a greater 
responsibility at a local level to select those traders for control and to follow 
up recovery of VAT debt on the basis of locally determined criteria. This is 
done within centrally agreed budgetary and staffing allocations (UK). 
Furthermore Denmark and the United Kingdom set revenue and results 
targets for each regional/local office. 
2.5. HUMAN RESOURCES, TRAINING AND COMPUTERISATION 
Organisational differences and particularly the trend towards multi-tax 
administrations in Member States make it difficult to assess and compare the staff 
and resources allocated to VAT administration tasks and are an obstacle to the 
comparison of resources in Member States' administrations (see Table 7). When 
comparing the evolution of staff since the First Report it can be noted that: 
- the number of controllers has increased in Ireland and Luxembourg; 
- the general staff resources have remained stable in Greece, France (DGI), Italy and 
the United Kingdom; 
The controls at internal frontiers and the transitional VAT regime have not resulted 
in significant changes in staff levels. 
The increase in the number of registered taxable ' persons and the increased 
complexity of the tasks entrusted to the VAT administration including the 
transitional VAT arrangements, together with limited increases in human resources 
has led all Member States to attach increasing importance to improving productivity 
by training and computerisation. 
As concerns training all Member States run training programs for new recruits and 
continued programmes on new legislation and other relevant issues for more senior 
staff. The duration and coverage of those programs, as well as the mix of courses 
and on-the-job training continue to vary widely across Member States (see Table 
8,9). General and specific VAT training is organised by administrations on central 
and/or local level. 
Increasingly, the importance of Community issues and anti-fraud training (F, NL) is 
recognised and reflected in special training programs. 
In all Member States computerisation has been further developed as shown in Table 
10. Procedures of registration and of control of missing declarations have been 
computerised, the other procedures enjoy full automatisation in most Member States. 
Use of expert systems for control and selection of taxpayers to be controlled is made 
or contemplated in the majority of Member States. (Annex 7) 
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2.6. COST-EFFECTIVENESS AND EQUALITY OF TREATMENT 
All Member States pursue as general objectives of VAT administration the 
maximisation of the collection of (short-term and longer-term) VAT revenue. All aim 
at maximising levels of voluntary compliance, and minimising and deterring 
avoidance and evasion, particularly by detecting and repressing the most complex 
fraud cases. 
Revenue maximisation or efficiency is best served by allocating resources to detect 
and correct the groups of traders for which the expected increase in tax liability is 
highest. Risk analysis techniques are increasingly used by all Member States to help 
attain this objective. Revenue maximisation may also help the administration to 
project an image of efficiency and hence deter avoidance and induce voluntary 
compliance. 
Administrations that emphasise the efficiency objective tend to establish high 
registration thresholds, and produce targeted, risk-based control and debt recovery 
plans. 
Extensive coverage implies ensuring that all taxpayers regardless of their size, 
activity or location have a similar probability of being audited and enforced by the 
administration. Low registration thresholds, broad control programmes based on the 
"control cycle" (the average frequency of controls for a typical firm) and systematic 
pursuit of all debts, are meant to serve this objective and help deter taxable persons 
from future non compliance. 
Member States' registration, assessment, collection and control plans are influenced 
by a trade-off between these two major, more specific objectives. While all Member 
States pay attention to both objectives, Denmark, the Netherlands and the United 
Kingdom place emphasis on the maximisation of results while Belgium emphasises 
more exhaustive treatment of all taxpayers. 
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CHAPTER 3 
PLANNING AND UNDERTAKING VAT CONTROL 
3.1. INTRODUCTION 
VAT is self-assessed by taxable persons in their returns. Control procedures aim at 
checking the level of voluntary compliance, that is, at checking the reported tax debt 
for completeness and accuracy. This involves: 
1. analysing the information submitted by taxable persons in their returns ana* 
checking it against other relevant information available to the VAT 
administration from various sources, 
2. selecting those taxable persons to be controlled, 
3. for the taxable persons to be controlled, checking the information reported 
against a number of relevant trader specific indicators or general ratios 
singled out by the administration which can be inferred from the accounting 
or other information available from the inspected trader or third parties. 
The general objectives of control do not differ from those of the other VAT 
functions, referred to in chapter 2 above, namely to maximise the collection of 
(short-term and longer-term) VAT revenue by the cost-effective use of resources, 
and to do so by maximising levels of voluntary compliance, and minimising and 
deterring avoidance and evasion, particularly by detecting and repressing the most 
complex fraud cases. 
The range of performance indicators and targets typically used in Member States 
alongwith a review of the operational procedures to monitor and evaluate 
performance will be discussed in chapter 5. 
This chapter will identify the challenges that are facing Member States in undertaking 
their controls and outline the planning and operational methodologies that they have 
adopted to meet their respective control objectives. 
3.2. GATHERING INTELLIGENCE 
The information enabling Member States to check the completeness and accuracy of 
tax returns is largely held by taxable persons. Hence Member States, in addition to 
tackling their planning also gather intelligence on trader's activities in a systematic 
manner. 
This intelligence when allied with an analysis of the trader population to identify 
those most likely to evade or underreport their tax liability contributes to an 
approach that is both cost effective in the discovery of additional tax liability and can 
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have a deterrent effect on that proportion of the taxable persons not actively 
controlled. 
The information available to respective Member States on the individual taxable 
persons and their taxable operations, does vary. All Member States have access to 
accounting records of the trader, whereas access to banking records may be limited 
to certain specific information requests. Most VAT administrations have also access 
to the records and files of other tax services (particularly if VAT is controlled jointly 
with direct taxes); and sometimes to relevant social security records. 
In addition to the recapitulative statement of intracommunity transactions to other 
Member States provided for in Article 22.6 (b) of the Sixth VAT Directive, some 
Member States (E, P) additionally require the preparation by taxable persons of 
listings detailing all traders to whom even domestic supplies have been made. 
Denmark, Italy and Spain are also able to monitor other key transactions by taxable 
persons such as real estate or vehicle purchases which are fed into comprehensive 
data systems managed by the tax administration. 
Some Member States have found it particularly useful in gathering intelligence on the 
operations of specific trade sectors to actually organise their control activities so as 
to maximise the knowledge of particular trade sectors or categories (D, DK, I, IRL, 
NL). 
Denmark and Ireland place emphasis on early visits to traders. Such an approach 
whilst serving to assist the future compliance of the taxable person also is an 
effective registration control that limits the potential risk of future evasion. 
In most Member States research and empirical studies are carried out reviewing the 
previous years experience of tax controls and other external information to 
supplement their intelligence gathering noted above. 
3.3. ANALYSING TRADER POPULATION FOR CONTROL SELECTION 
In selecting the taxable persons to be controlled as part of their control programmes, 
Member States in general allocate available resources to control those groups of 
taxable persons most likely to evade or avoid their tax liability or those for which the 
potential for tax recovery is the greatest relative to the cost of control. 
Most Member States also ensure that controls are organised so as to have a broad 
impact in terms of encouraging improved compliance in the trader population as a 
whole. 
The large number of taxable persons in Member States and the volume of statistics 
and intelligence available has required the development of increasingly sophisticated 
computer systems that act as an aid to control selection. Such developments have 
improved the quality and effectiveness of desk audit procedures. These developments 
have allowed some Member States to more carefully select, or even reduce the 
numbers of control visits undertaken. France, with about 2,5 million taxable persons 
uses such techniques to assist it in undertaking more than half a million documentary 
controls each year. Based on the results of these some 37,000 control visits might be 
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undertaken. In comparison the United Kingdom, with 1.6 million taxable persons, 
places emphasis on control visits, selected on the basis of a twice yearly automatic 
risk analysis, rather than on desk audit. Some 378.000 traders are visited annually. 
(See Table 16). 
3.4. CRITERIA AND DECISION RULES 
Most Member States apply a range of criteria listed below in selecting the 
homogeneous group, sector, activity, and of individual taxable persons most likely to 
be inspected. The use of these criteria alongwith the appropriate decision rules 
allows Member States to broadly determine a number of aspects: 
a) the type of investigation e.g. VAT refund control, intracommunity transaction 
check, large business, or risk trader; 
b)the breath and depth of the control to be carried out e.g. a broad inspection for all 
taxes covering all periods, or short inspection covering only the present tax period, 
or to check compliance with invoice or other VAT legal requirements (e.g. 
intermediate controls in Greece in cases of the irregular presentation of returns); 
c) the level and experience of the staff to be used that will ensure that cases are 
assigned to the most appropriately trained controllers. 
Some decision rules are based on a consistency check of individual traders' returns 
with either his own previous returns or with reference levels and averages based on 
the returns of traders in comparable trade sectors or geographical areas. These 
reference levels are regularly updated and amended. 
For those taxable persons whose risk assessment does not warrant .immediate 
control, some Member States set targets that would ensure that as many traders as 
possible are controlled within a time limit, normally 5 years, that will allow legal 
recovery of under-declarations. However other Member States recognise given the 
vast numbers of SME's that it is unlikely with limited resources available that all 
entities might be covered in that period. One Member State anticipates that very 
small firms will be controlled on average once every 57 years. Other Member States 
whilst not seeking to determine any control cycle for the majority of firms would 
nevertheless consider it important in tackling very large firms that a cyclical approach 
should be taken so as to determine the specific trading areas of risk to be examined 
(DK, GR, IRL, NL, UK, etc.). 
The practical impact of such decisions in Member States can be seen in Tables 13 
and 14 and Annex 6. With reference to large, medium and small enterprises, these 
tables note the average duration of a control, the number of inspectors participating 
and how often controls on the respective enterprises might be carried out. 
3.5. RISK CRITERIA 
The criteria most widely reported by Member States in selecting groups or individual 
traders for control are the following: 
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3.5.1. Financial Risk Criteria 
- Size and structure of the business 
- Turnover and number of employees 
- For groups of companies, the number of branches and their national 
and international spread 
- Revenue activities 
- Turnover 
- Tax throughput levels (level of input tax plus level of output tax) 
- Turnover / total input tax ratio 
- Turnover / number of employees (perhaps cross-checked to social 
security records) 
- Profit margin percentages 
- Level of partial exemptions 
- The complexity of traders accounts 
- Number of accounting documents processed and record systems. 
- The quality of taxable persons internal controls 
- review of work and quality of trader staff, internal and external 
auditors 
- Sectors whose customers are end consumers 
- cash trading 
- Sectors with difficulties in providing justification of purchases e.g. from 
individuals 
- -Firms entitled to repayment of VAT or compensation 
- Firms undertaking intracommunity transactions 
- discrepancies between declared inputs and inputs identified using 
the VIES system 
- the use of non existent or incorrect VAT registration number 
- Newly registered firms. 
3.5.2. Compliance record criteria 
- Failures to submit compulsory documentation 
- Failures to submit VAT returns 
- Incidences of late, partial or non payment 
- Previous under-declarations discovered or voluntarily disclosed 
- Reputation of proprietors/directors (e.g. previous involvements with 
bankrupt or insolvent traders with VAT debts) 
It should be stressed that complementing the use of such models most Member 
States rely on the professional training of controllers themselves at a regional or local 
level to make the final control selection. 
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Some Member States (DK, NL, UK) combine the use of financial risk indicators with 
indicators of compliance record in determining the type, breadth and depth of control 
that they will undertake. In other Member States (E, I, P) such criteria are used both 
by the centre to define the trader profiles for control and by local officers to select 
individual taxable persons within the profiles selected for inspection. 
Other Member States (I, IRL, UK) selecting traders for control on such criteria will 
also undertake information visits that will supplement existing control statistics and 
enhance the quality of future selection exercises. 
3.6. UNDERTAKING VAT CONTROL - SOME SELECTED EXAMPLES 
The realisation by a number of Member States (B, DK, E, F, IRL, UK) that the risks 
of VAT avoidance and evasion are linked to the specific practices of different trade 
sectors has led them to identify a number of high risk industries such as hotels, 
restaurants, bars; professional trades e.g. lawyers, dentists, hairdressers; garages and 
vehicle repairs; goldsmiths and jewellers; construction, cleaning and related 
industries. (See Annex 18) 
The improved ability to identify such sectors allows Member States to focus on 
particular areas so as to improve their knowledge of the operations involved. 
The Netherlands have structured its tax offices on a team basis, with each team 
responsible for the control of individual tax entities identified on the basis of their 
financial and / or fiscal interests and relationships (e.g. farming, construction, bars / 
restaurants, new companies etc.). 
Ireland has adopted a similar approach and has reorganised its control administration 
into ten.sectors e.g. investment and rental companies, group and public limited 
companies. Each sector deals with the requirements of trader categories that have 
been structured around the major sectors of the economy. 
For both of these Member States this approach has been supplemented by the use of 
team audits (for joint tax audits) and has been based on the development of extensive 
trade profile manuals. Such manuals provide a guide to assist the control work. Their 
contents typically include background audit experience, case selection notes, pre-
audit preparatory work and standardised audit programmes tailored to the identified 
risks of each sector. Such standardised programmes are also used in D, I, UK. 
The VAT control methodologies used by Member States when undertaking a control 
involve the systematic application of a range of VAT control procedures which if 
carried out satisfactorily will assist in ensuring that the control work is consistently 
completed to a high standard. Tables 11 and 12 outline for all Member States the 
range of control procedures used at the various stages of the audit from the 
preliminary checks through to the procedures applied in undertaking a control visit. 
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3.7. VAT CONTROL IN A RISK SECTOR 
The actual range of controls undertaken on risk sectors such as a sector whose 
customers are end consumers paying cash e.g. restaurants, might include some or all 
of the following checks. 
The identification and selection of such traders can initially include exercises to 
detect the deliberate or non deliberate failure of a trader to notify their liability to 
register for VAT. The United Kingdom which undertakes a "policing" of the trader 
base undertakes extensive research including reviewing trade and commercial 
telephone directories. Otherwise if the traders are known, Italy for example selects a 
taxable person whose reported profitability is inadequate or for whom the level of 
consumption and expenditure on purchases or services is high in comparison with the 
amount of income. 
The control of such a trader can include an inspection of registers and checks on 
compliance with formal obligations, supplemented by a check on the consistency of 
the VAT revenue with the firms activities. Such checks can be based on the 
administration's own background knowledge of the specific sector; trends in the 
balance sheet; the location of accounting records and of other business or storage 
areas; knowledge of the firms inputs which do not generate deductible VAT e.g. staff 
costs. 
Using the example of the restaurant trade, careful detailing and checking of labour 
used to compulsory documentation records can identify undeclared labour. For 
restaurants, regular visits, to evaluate the average number of customers and acquiring 
a copy of the menu can allow a calculation of the average amounts charged to be 
compared with tax receipt counterfoils issued and cash till readings. 
The use of till interrogation techniques on modern cash tills by Member States (UK, 
F) allows an analysis of the traders cash activities on an audit roll. Efforts by traders 
to conceal or alter these records have been countered by an increase in visits without 
appointments. 
Where the taxable person, to maintain acceptable profit levels, suppresses purchases 
so as to disguise undeclared sales (whose inputs are mainly zero rated or have a high 
labour charge) there is a need to check suppliers' records of sales against the 
purchase records of customers. Some Member States (E, P) require all traders to 
provide lists of domestic suppliers. Belgium uses taxpayers' declarations to establish 
similar lists. These listings are effectively applied in targeting those traders who seek 
to misstate their VAT liability and are also an effective tool in tackling fraud using 
false invoices. The United Kingdom is in the process of developing a computer 
programme which will analyse the declared purchases of a business with a view to 
correlating them with an estimate of the actual purchases that would be 'needed' to 
service both the customer base and the product or service range. 
3.8. VAT CONTROL OF LARGE TRADERS 
As regards size, analysis of traders by Member States has shown that some 4 to 10% 
of the largest taxable persons may account for some 70 to 80% of tax revenues 
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whilst some 70% of the population of registered taxable persons, normally the 
smallest businesses, may contribute only a very small percentage of resource. 
The control of large traders is increasingly becoming an exercise that is planned and 
undertaken separately from that of small and medium firms. The relative size of such 
companies, their considerable revenue contribution, the complexity of their 
accounting and book-keeping systems, and their dealing with often intranational or 
international subsidiaries has been recognised. These controls aim at covering all tax 
periods (e.g. D). They require training control officers with particularly advanced 
audit and tax skills, and the use of more complex auditing packages. 
The control of large traders normally requires a different approach from that of other 
traders in terms of the cycle of coverage, the duration and depth of the control, and 
the level of training for staff involved. 
Member States recognise this and have adopted specific control strategies for large 
firms often using a systems based approach (F, NL, UK). The systems approach is 
designed to ensure that all aspects of the traders business are looked at systematically 
according to perceived risks. The approach requires the documentation and 
awareness of the revenue significance of the traders structure, organisation and 
accounting systems. The geographical spread and the business diversity of 
subsidiaries can require the co-ordinated assistance of regional or local teams in 
some Member States. 
When undertaking control of a large trader on a cyclical basis a specific trader system 
will be targeted e.g. purchase ledger. The specific risk areas are identified and 
documented using flowcharts, narrative descriptions alongwith responses to 
questionnaires designed to identify the key controls. 
Some Member States (F, UK) would consult with the organisations -concerned 
department of the internal audit who may have already undertaken part of this work. 
The key control systems are then evaluated so as to determine whether the traders 
system will provide accurate and timely information to allow him to meet his fiscal 
responsibilities. Evaluation is done using a combination of compliance tests (that 
confirm if the control has worked consistently and correctly) and tests that 
substantiate the value and correctness of the transactions themselves. The necessary 
extent of physical checking of transactions, statistically sampled, will depend on the 
degree of effectiveness of the operation of the internal controls. 
In undertaking controls, particularly of large traders, Member States' administrations 
(D, DK, E, F, NL, UK) will maximise the use of computer assisted audit techniques 
that assist in the extraction and analysis of trader data that is downloaded onto the 
controllers PC. Such software facilities are widely used in Member States to allow 
the flexible file analysis and sampling across the range of trader files e.g. inventory, 
payroll, general and sales ledgers. The facilities of the software are extensive and 
include file comparisons, consistency checks, sampling (random, statistical etc.), 
record stratification, and flexible reporting formats and graphics. Member States (B, 
DK, F, NL, UK) are finding the use of such file interrogation software to be a cost 
effective method of facilitating the analysis of the traders appropriate financial files 
on their own PCs. These techniques are being used currently in the control of large 
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firms undertaking intracommunity operations. The use of expert systems highlighted 
in the first report has also been significantly extended (see Annex 7). 
3.9. CONTROLLING SPECIFIC VAT RISKS 
For those taxable persons whose circumstances in themselves present a separate risk 
(e.g. new registration traders, VAT refunds), Member States have developed specific 
criteria and parameters alongwith associated objectives that determine the selections 
for control. Annex 8 describes the range of procedures used by Member States in 
controlling VAT refunds. 
3.10 CO-OPERATION WITH OTHER MEMBER STATES IN PLANNING AND UNDERTAKING 
CONTROL 
Most Member States (see annex 10) have developed some forms of co-operation in 
planning controls particularly on a bilateral basis. 
One of the most developed links is that between the United Kingdom and Ireland. A 
Memorandum of Understanding provides for operational co-operation regarding the 
risk to tax revenues in trade between the Republic of Ireland and Northern Ireland. A 
programme of audit and control visits is agreed each year whereby traders involved 
in cross-border trade are selected for control action. The results of these controls are 
exchanged. The selection of traders is usually focused on sectors perceived as having 
a particular risk notably market/mobile traders, cash and carry outlets. 
A number of Member States are currently participating in an experiment on 
Multinational trader control organised by the Commission10. This experiment will be 
completed in 1995. Annex 5 summarises the guidelines currently used by Denmark in 
implementing simultaneous audits with Sweden, Finland and Norway. 
3.11. IMPROVING TAXABLE PERSONS RIGHTS AND ACCESS TO INFORMATION 
In most Member States unless fraud is suspected taxable persons are advised in 
advance of the date of a control and may in some (DK, D, E, F, NL) be advised of 
the business area to be examined. Similarly in most Member States the control 
findings can be discussed with the trader prior to the preparation of the control 
report. Also traders can be advised in advance of the likely imposition of a severe 
penalty and given an opportunity to present their case. In all Member States a taxable 
person can appeal on the conclusions of a control (see Table 15). 
10 Council Conclusion of 11 July 1994 concerning the fight against fraud 94/C 292/01 (OJ C 292/1 of 
20.10.94). 
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CHAPTER4 
VAT DEBT MANAGEMENT 
4.1. OBJECTIVES 
The overall objectives of VAT administration, i.e. revenue maximisation, maximising 
voluntary compliance and minimising and deterring avoidance and evasion are 
translated in the debt management area into the following more specific objectives: 
a) promoting prompt payment 
b) preventing new arrears from getting older and clearing outstanding arrears. 
4.2. PROMOTING PROMPT PAYMENT 
In order to avoid VAT arrears from occurring all Member States promote voluntary 
prompt payment by reducing compliance costs (see chapter 5), more closely 
monitoring traders to analyse their risk of default and by applying, where necessary, 
preventive measures (e.g. requesting guarantees) 
Close monitoring of traders, their payment position and their solvency requires 
gathering information in a way similar to that required in planning and undertaking 
control. In addition data on the taxable person's assets position is gathered. 
Such intelligence is obtained from the data base of taxpayer's global fiscal situation 
(B, D, E, F, I, L, P) or from a general debtor's registry (DK), registers held by 
government bodies (e.g. concerning land mortgage, vehicles) or chambers of 
commerce (see Annex 11). Other Member States emphasise the usefulness of 
monitoring taxable persons ("clients") through regular contacts between the staff and 
the trader (NL). 
The information gathered is used to analyse trader's population solvency risk using 
risk criteria namely the size of the debt (DK, D, GR, E, F, IRL, L, P, UK), age of 
debt (B, D, GR, F, IRL, I, L, UK) the trader's compliance record (D, L, NL, UK) as 
well as the business's condition (B, D, E, F, IRL, I, UK) and enforceable assets. 
On the basis of risk analysis' results categories of traders are selected for special 
preventive action, like the issue of advanced reminders that are increasingly produced 
by computers automatically or telephone reminders (DK, UK) or preventive visits to 
advise new traders of their paying obligations and the consequences of non 
compliance (IRL). Depending on the results of such contacts, guarantees or advance 
payments are requested (e.g. by setting up a monthly advance payment scheme), or 
recovery measures prepared in advance (UK). 
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4.3. CLEARING OUTSTANDING DEBT AND PREVENTING NEW ARREARS FROM 
GETTING OLDER AND CUMULATING 
4.3.1. Recovery maximisation and Equal Treatment 
An old debt is a bad debt - the .older, the more difficult to recover. Therefore 
all Member States take care to detect VAT debt as early as possible, 
progressively with the assistance of computerisation. 
The way in which Member States' administrations approach the task of 
clearing outstanding arrears depends, as was the case with control, on the 
relative weights they attach to revenue maximisation and to exhaustive 
treatment. 
Belgium and Germany are legally required to pursue all arrears with the same 
level of priority regardless of the amount at stake. In practice, nevertheless, the 
competent local officer exercises regularly immediate action in the case of high 
risk and large debts (e.g. fraud, cases close to statutory time limitations). Also 
specific branches of activity (e.g. construction, market-traders etc.), are closely 
monitored. 
Other Member States recognising that VAT arrears have piled up due to the 
recent economic recession and with limited resources, have approached 
outstanding arrears by applying risk analysis and selecting specific categories 
for priority recovery according to risk criteria. Increasingly Member States 
also set and monitor performance indicators and targets (e.g. NL, UK, to be 
introduced in IRL) which are discussed in Chapter 5. 
The similarities with the process of risk analysis and categorisation of taxable 
persons and the interrelationships between control and debt management has 
led some Member States to set up specialised units for specific categories of 
debts or traders which combine control and collection functions. Such special 
recovery units exist already for large business (E, NL), for large debts (IRL), 
for specific categories of business (NL) and specific payment schemes (UK). 
Most countries using developed risk analysis techniques whilst pursuing all 
debts give special priority to enforcing larger ones (DK, E, F, GR, IRL, P, 
UK) and some do the same with difficult debts (e.g. B, D, GR, F, IRL). Such 
debt selection can be undertaken centrally (e.g. IRL) or locally, the competent 
officer's selection being assisted by central guidance (e.g. UK). 
In order to reconcile the objectives of cost-effectiveness and equal treatment 
some Member States have tried to reduce the costs of collecting small debts. 
Spain for instance has introduced simplified mass seizure measures for bank 
accounts whereby the tax administration electronically sends to banks the files 
of small tax debts which are to be debited in their clients' current accounts. 
Finally, farming out arrangements with outside agents is practised (I, IRL) in 
order to concentrate efforts on a cost-effective and equitable tax collection. 
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4.3.2. Obtaining detailed information on the debtors financial situation 
In order to effect successful debt enforcement it is essential, as for preventing 
defaults (see above), to obtain information on the debtor's financial situation. 
However, unlike with the prevention stage where most information is obtained 
from standard sources, the enforcement stage may require a deeper level of 
information that can only be obtained with ad-hoc searches and is therefore 
more resource consuming. 
Tax administrations in all Member States are empowered to request 
information from the taxpayer to inspect his premises and records. However, 
these sources may not be sufficient so that tax administrations might wish to 
contact third parties (e.g. banks, insurance companies, fiscal advisors or 
clients). 
Nevertheless, procedural law in Member States does not permit unlimited 
investigation. Third parties may only be contacted in some Member States if 
the required information cannot be obtained from the taxpayer himself (e.g. D). 
Banking secrecy may be an obstacle in some Member States which cannot (L) 
be eliminated or only in exceptional cases, e.g. fraud (D, E,) on the basis of 
special court warrants (IRL, P), whereas others (DK, E, F, GR, I, NL) may 
have easier access to financial institutions' information. Furthermore, fiscal 
advisors or clients may have a right to refuse to supply information if thereby 
jeopardising their duty of professional or other confidentiality (D, E) 
Further difficulties stem from the procedure of order of attachment following 
to which certain administrations are obliged to attach the assets and rights of 
the debtor in a particular order (E, P) thus making it necessary to investigate 
the financial position in detail. E.g. in Portugal movable assets have to be 
attached before seizure of immovable assets may be undertaken. 
The processing of information may lead the administration to classify debts 
into three main categories 
a) Debts which are recoverable by direct enforcement 
b) Debts which are immediately irrecoverable, partially or totally, but that are 
recoverable if delays of payment provisions are granted 
c) Irrecoverable debts 
4.4. ENFORCING DEBTS 
In general, Member States may levy distress upon all goods and chattels of a 
defaulter without restrictions on the nature of the goods (movable, immovable 
property, claims against and goods held by third parties). The seized objects serve to 
cover the VAT debt. In one Member State (NL) even assets belonging to third 
parties furnishing or equipping the debtor's property may be seized. 
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However, legal or practical restrictions exist in seizing assets (L for immovable 
property, E for assets not belonging exclusively to the defaulter, e.g. spouses joint 
bank accounts). 
Furthermore, seizure is restricted by law as far as goods are needed by the defaulter 
for his basic domestic necessities (all MS) or for his activity (B, DK, UK). 
Restrictions may also result from the principle of proportionality, i.e. the value of the 
sizeable asset must be consistent with the value of the debt (I, P). 
A further difficulty stems from the fact, that in principle, fiscal administrations are 
creditors like all the other creditors of the taxpayer, and his property is the common 
pledge of his creditors. This means that administrations have to act quickly, notably 
in case of ranking orders determined by the date of seizure. However, in some 
Member States the Treasury has a general preference on his movable property (B, F, 
L, NL, P) and a legal mortgage on his immovable property (B, F, L). 
Member States try to overcome the ranking obstacle by realising their tax claim at 
the earliest possible stage, e.g. by compensating the debtor's refund claims with the 
VAT debt (e.g. B, DK, D, E, ERL) or by simplified recovery of arrears by seizure of 
bank credits. Belgium can undertake action to set aside the ranking order by its 
power to attach agreements made by the debtor to deceive his creditors. 
Member States complement the deterrent effect of enforcement of VAT debts with 
the application of pecuniary penalties in case of serious infractions to tax obligations 
as discussed in the First Report. Some Member States extend the range of penalties 
also to the withdrawal of authorisations and professional licenses (DK, P in case of 
repetitive serious infractions) or even the withdrawal of the right to leave the country 
(GR for large debts). 
4.5. ARRANGEMENTS FOR DELAYING PAYMENTS 
Instant enforcement measures may be not appropriate and might even endanger 
future tax payments. Taking into account the rule of prompt VAT debt payment 
stated in Art. 22 par. 5 of the 6th VAT directive, deferred payment is not granted in 
Portugal and only in exceptional circumstances in most Member States (see Annex 
13), where and as long as the trader needs it to meet temporary financial difficulties. 
It is thus refused unless the administration can satisfy itself that the taxable person 
will be able to service the rescheduled debt. 
In order to prevent deferred payment schemes to become competitive alternative 
sources of finance for the taxable person, some Member States (e.g. D) require the 
presentation of a statement of the debtor's assets. 
In order to assure that it is considered by taxpayers to be an unattractive source of 
finance the following steps are undertaken: 
- guarantees covering the debt are requested (all Member States except UK, GR), 
- interest is charged (all Member States except UK) at rates higher than commercial 
(all Member Stated except D, E, I, NL), 
- is granted for the shortest possible time span, usually not longer than 6 - to 12 
months 
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30 
- is revoked if the debtor's financial situation improves. 
Apart from the aspect of whether the measure is needed, Member States make its 
granting dependent on the circumstances having led to the trader's financial distress, 
notably whether it is due to external or debtor-induced causes as well as on his 
payment record. 
Decisions are taken by the local officer (DK, F, UK) or centrally (e.g. GR, IRL, L). 
In other Member States the decision-making level depends on the amount deferred 
(e.g. D). Agents in ERL may accept payment on an instalment basis, however, agents 
in I have no power to agree flexible dates for payment. 
4.6. IRRECOVERABLE CASES 
Irrecoverable cases are normally written-off but it is sometimes possible to revive the 
debt if circumstances change within the recovery delays. 
Remissions are limited to insignificant amounts and are either not provided in several 
Member States (B, GR, E, F, I, IRL, P) or have not been applied in recent years ( L). 
In some Member States a right to remit is retained in cases where VAT collection 
would be inequitable or give rise to exceptional hardship for the taxable person and 
where no prospect of payment in the foreseeable future exists (DK, D, NL, UK). 
Existing practices for remissions used in Member States have effects on their 
uncapped VAT own resource bases. 
In several Member States (e.g. B, D, IRL, L) debt not recovered in a bankruptcy 
procedure and written off is revived if the debtor has started a new beneficial activity. 
In Italy tax agents are made financially responsible for unrecovered amounts unless 
proof is given of their diligence. Another Member State (F) makes its officials 
financially responsible for the successful collection of all debts referred to them. 
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31 -
CHAPTER 5 
MONITORING AND EVALUATING VAT CONTROL AND DEBT MANAGEMENT 
5.1 INTRODUCTION 
The performance of VAT procedures can be evaluated by using indicators of both 
levels of achievement of objectives and of the costs used in operating them. 
The general objectives of VAT administrations were outlined in Chapter 2 and 
include the maximisation of voluntary compliance, and of forced compliance and 
deterrence of avoidance and evasion. The more specific objectives of control and 
debt management, referred to in Chapter 3 and 4 included the maximisation of 
additional liability detected and of debts recovered, promoting prompt payment and 
the minimisation of outstanding debt. A summary of the national objectives and key 
performance indicators used by Member States is at Annex 14. 
The costs of VAT procedures are shared between the administration and taxable 
persons. Administrative costs can be classified as those costs borne by the tax 
administrations in operating, collecting and enforcing VAT. Compliance costs are 
those borne by the traders in complying with the rules and regulations related to 
VAT procedures including for example, bank and record keeping and return filing. 
Administrative and compliance costs are often inter-related in so far as services to 
• taxable persons reduce compliance costs but increase the costs of the tax 
administration. Similarly the levels of taxpayer compliance can also be related to the 
respective levels of costs for the administration and taxpayers. 
Member States are increasingly recognising these aspects and are generally 
implementing measures with a view to balancing a reduction in both administrative 
costs and compliance costs with an improvement in compliance levels. 
5.2 MEASURING AND MONITORING GENERAL VAT COMPLIANCE AND COSTS 
The measurement of overall compliance by reference to the extent of the 
"compliance gap" or tax evasion, has been undertaken by way of large macro-
economic reviews (E, I, GR) or by reviewing the results of tax controls and regularly 
analysing the results of fiscal receipts with results achieved. The United Kingdom 
maintains statistics on evasion from which a national profile is prepared annually. 
(See Annex 17). 
The use of tax data to estimate the scale of tax fraud in various sectors has been 
undertaken in Spain and is being considered in Luxembourg (see Annex 17). The 
United Kingdom is in the process of developing a range of tax yield indicators that 
will attempt to explain variations in tax yield. 
Most Member States (B, D, GR, E, F, IRL, NL, UK) are able, if only occasionally, 
to identify their global costs of administering VAT. These are normally expressed as 
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32 
a percentage of total annual revenue and generally vary from 0,8% to about 2% (See 
Annex 15). It should be noted that the methods of calculation and respective periods 
are not uniform between Member States. 
5.3 SPECIFIC PERFORMANCE INDICATORS AND TARGETS 
In relation to the more specific objectives that they set, most Member States have 
identified a range of performance indicators and targets that can be used at both a 
central and local level to monitor the operational or strategic success of their plan for 
controls or debt management. 
Most of the targets and performance indicators typically used by Member States 
compare the number of controls undertaken, the volume of debts resolved or 
outstanding and the resources applied in achieving those results. 
The United Kingdom uses the level of underdeclarations voluntarily disclosed as a 
positive indicator of the success of its control policy in encouraging improved 
compliance. However, most of these measures in all Member States relate to 
analysing the administrations performance in relation to its own costs and to the 
actual results achieved i.e. 'forced' compliance. 
Thus national administrations can monitor for example: additional liability detected; 
average debt arrears; the number of controls undertaken or debts recovered per 
officer; the average additional yield per officer or per control; the number and value 
of debts recovered as a % of either total debt outstanding or revenue; the level of 
debt outstanding as a proportion of 12 months liability or revenue. Additionally a 
range of unit costs are produced to indicate for example the cost per debt collected 
and visits made. 
There exist, however, relatively few indicators that either routinely measure the costs 
to the trader in meeting their tax responsibilities or that allow a clear assessment of 
the improvements in overall voluntary compliance across the population of taxable 
persons. 
5.4 RECORDING AND MONITORING VAT CONTROL WORK AND DEBT RECOVERY 
Effective performance indicators rely upon the quality and the accuracy of the data 
upon which they are based. 
In most Member States basic information on controls is prepared on the conclusion 
of visits to traders. Such reports, the information from which is subsequently 
computer verified and analysed, contain statistics on the number of controls 
completed, the category of traders controlled, the additional liability detected, the 
time taken to complete the control, and the number and grade of inspectors 
participating. 
In the field of debt recovery information on amounts outstanding, key dates, actions 
taken and the type of trader is typically recorded on an individual case basis. 
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33 
Reflecting the important relationship between VAT control and recovery, certain 
Member States (E, F, DK) have developed completely integrated computer systems 
that permit the monitoring of cases from the inclusion in the control plan through the 
subsequent and successive stages recording control results and monitoring the 
recovery as it is made. 
This basic information that originates at an individual trader or control level is 
normally dealt with in a broadly similar way in all Member States. 
Firstly, the individual files of the taxable person are either updated with the results of 
the control and/or monitored during recovery. 
Secondly, individual activity reports are analysed at a local or regional level to 
calculate basic statistics that indicate, for example in relation to control work, the 
staff time spent on a task and the cost of the work compared with pre-set or 
expected averages. 
Thirdly, the overall results of controls undertaken for a specific office or region are 
aggregated and analysed in a manner and format that allows both local and central 
managers to evaluate performance. This is done by both reviewing overall control 
and debt management results against the corresponding indicators or targets referred 
to above and by comparing the results between different regional and local offices. 
As indicated in chapters 3 and 4, the responsibilities for control and debt 
management are increasingly found at regional levels. This has necessitated the 
development of standardised recording and monitoring systems which allow the 
quick and flexible production of key performance statistics for managers at all levels 
in the administration. Subsequent use of the information as regards central or local 
trend analysis, budgeting exercises or revenue projections depends on the effective 
functioning and consistent quality of the reports prepared by local inspectors in 
completing their work. 
Using such information the centre can monitor that nationally taxpayers are receiving 
equitable treatment as regards their selection for control and that the treatment of 
debt is consistent for all categories of traders (B, D, DK, F, I, NL, UK). 
Most administrations do not rely solely on such figures but have teams that review 
the work of regions so as to ensure both the quality and effectiveness of 
administration staff and the equitable treatment of taxable persons (B, D, DK, E, F, I, 
P,UK). 
5.5 MEASURING THE IMPACT OF CHANGES IN PROCEDURES ON COMPLIANCE AND 
COSTS 
The impact of specific changes in legislation or procedures on costs and compliance 
has been estimated either in a quantitative or a qualitative way by some Member 
States (E, UK). The following examples of procedures in Member States indicate the 
close relationship between administrative and compliance costs, and compliance 
levels: 
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-34 
1) Member States having introduced or increased their registration thresholds (F, 
ERL, L, UK) reported positive impacts on both costs and compliance (F found 
a negligible impact on compliance). 
2) Reducing the frequency with which returns are required from taxpayers; 
simplifying the level of details to be completed and analysed on returns; 
improved payment methods (B, IRL, P). Some Member States (F, IRL, L) 
recognised a positive impact on costs to the administration, taxable persons 
and compliance levels. Belgium however has recently cancelled its annual 
returns scheme as a result of serious concern regarding the risk of an increase 
in VAT carrousel fraud using identification numbers of traders who disappear 
after registering for VAT. 
3) Providing a range of measures that allow taxable persons to familiarise 
themselves regularly with changes in VAT and their responsibilities. These 
include making regular visits to traders (DK, UK), the provision of free phones 
(E, F, I ), Minitel (F) and contacts with professional associations etc. Member 
States recognised most of these initiatives have had a positive impact on 
compliance, except France for the use of local office advisers. Member States 
(IRL, L, UK) considered that these measures reduced compliance costs. 
4) Variations in the number, depth and length of visit controls can have a 
significant impact not only on the costs to all administrations (F, UK) but also 
on compliance levels (F). 
5) The development of controls based upon specific trader sectors and the use of 
audit agreements with firms can also serve to reduce costs to the 
administration (DK, ERL, NL, UK). France and Luxembourg both identified a 
positive impact of simplified estimation of tax on inputs on compliance costs. 
'They differed however in their views on the impact on compliance* levels (F 
negative, L positive). 
6) Making VAT refunds more quickly (B, DK, ERL, I, UK), and allowing taxable 
persons with a small turnover to make flexible payments within a budgetary 
scheme (F, I, L, UK). Member States recognised a reduction in compliance 
costs and a slight or negative impact on administrative costs. France, 
Luxembourg did not observe any positive impact on compliance levels. 
7) Allowing new payment facilities for taxpayers such as electronic transfer (e.g. 
DK, F) was found to have a positive impact on both costs and compliance (F). 
8) Increasing the number of payment points for example in Italy by introducing 
the "conto fiscale", allowing payments to agents and at post offices, and 
electronic VAT payment by big traders (F, contemplated in ERJL) was deemed 
positive by these countries. 
Although the quantification of the actual compliance costs that fall upon traders, 
particularly small and medium sized, was found very difficult to gauge, the 
Netherlands has estimated that those taxable persons undertaking intracommunity 
transactions for VAT have compliance costs, due to these operations 20% greater 
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-35 
than those undertaking only domestic transactions. Denmark reported that it gives 
small companies a cash amount to offset book-keeping costs. 
Compliance costs for taxable persons carrying out intra-Community transactions 
must be compared to their compliance costs before the abolition of fiscal controls at 
internal borders. For the Netherlands, a study - carried out by the Economic Institute 
for Small and Medium-Sized Enterprises in the Netherlands - reports the introduction 
of the transitional VAT arrangements as having resulted in a structural reduction in 
the costs incurred by firms (See paragraph (74) of the Report from the Commission 
to the Council and the European Parliament on the Operation of the Transitional 
Arrangements for Charging VAT in Intra-Community Trade - COM(94)515final of 
23.1.94). 
The United Kingdom so as to allow it to measure the likely impact of a change in 
legislation or procedures on compliance levels, now gets information on costs from 
visiting and interviewing a representative sample of companies. 
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-36-
CHAPTER6 
CONCLUSIONS 
6.1. MAIN FINDINGS AND ASSESSMENT 
The analysis of measures recently taken or envisaged by Member States in order to 
improve the effectiveness of their VAT has led to the identification of the following 
findings: 
a) General objectives 
The general objectives identified in the first report (to maximise voluntary and 
forced collection, with an emphasis on voluntary compliance) appear now to 
be widely accepted and generally applied by Member States. 
The volume and type of work faced by administrations shows other common 
features, namely an increasing number of taxable persons to be managed by 
stable or decreasing staff resources, and an increased volume of 
intracommunity transactions. 
b) Organisation 
Administrations have reacted to this challenge by continued, improved 
training of their staff and by trying to improve the productivity of resources, 
through extensive computerisation, reallocation of resources and 
reorganisation of procedures to ensure cost-effectiveness. In this respect it is 
worth underlining the change towards client approach (covering multi-tax, 
multi-procedure) as opposed to functional approach (covering single tax, 
single procedure), and the shift towards a preventive approach to non­
compliance in some Member States. 
As regards organisation clear trend also emerges towards decentralisation. 
There is particularly a trend towards an increased role of local offices in 
selection of traders for control, and in debt management decisions. 
Decentralisation capitalises on local officers' better knowledge, experience of 
taxable persons' characteristics in their respective areas. Decentralisation 
requires an improvement in c-ordination and feedback. This has been 
supported by computerisation, which enables information supplied at any one 
level to be accessed by several locations and levels, and thus improved 
cordination. Computerisation also enables quick evaluation of results at 
various levels and the application of similar levels of effectiveness and equal 
treatment of taxable persons across all locations. 
The increase in data handling capacity has made possible the trend towards 
intelligence gathering and risk assessment This permits the systematic 
analysis and use of available information in dealing with specific cases. But it 
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-37-
also enables better identification of common risks and sorting of traders into 
categories. 
Risk assessment and sorting of traders then permits more standardised, cost-
effective control and debt recovery programmes tailored to various types of 
traders. 
c) Control 
Several trends also appear regarding control orientation. As a consequence of 
the increased capacity of analysis of the information available to VAT offices, 
there is a trend in Member States to enhance the role of desk audit both to 
increase the effectiveness of more targeted audit visits and to replace where 
possible resource intensive visits with lower cost standardised desk checks. 
An increasing number of Member States have integrated the control of all 
taxes and for those keeping them separate co-ordination has nevertheless 
increased. This process, which was already more developed in the debt 
collection area, is consistent with the "client" approach and enables the best 
use of available information and avoid duplication of effort. 
Control and recovery are also increasingly approached in a joint way by 
Member States. Successful collection implies tackling non-compliance both in 
the tax assessment and debt management areas. Evasion techniques identified 
by control departments (e.g. "phoenix" companies) have also become apparent 
at the Recovery stage of established debts. Furthermore, there is a tendency to 
broaden the range of control visit types, to enable Member States to apply to 
each trader the most appropriate combination of thorough (often multi-tax) 
controls with shorter, more flexible checks on specific issues (e.g. 
intracommunity transactions). 
d) Debt management 
As regards debt management a common feature is that the number and 
relevance of arrears has also increased. 
This trend is due mainly to the effects of recession. In view of these difficult 
recovery cases Member States have increased the use of time-to-pay 
arrangements. These arrangements may enable the eventual recovery of tax 
debts which would otherwise be unrecoverable. Attention must be paid 
however not to grant them to traders that will not be able to honour those 
arrangements or to those that can finance their tax debt on reasonable terms 
from other sources. 
e) Performance evaluation 
Increasing attention is devoted by Member States to performance evaluation. 
However improvements in this area are still needed. Performance indicators 
are developed and monitored in terms of compliance levels and 
administrative and compliance costs. 
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-38 
Evaluation has become more necessary because of decentralisation, the need 
for cost-effectiveness, and the prioritisation of objectives. It has also been 
made more cost-effective by computerisation and standardisation. The range of 
performance indicators must carefully be selected so as to avoid excessive 
priority being given to short-term financial objectives, which would lead to 
neglecting more difficult or financially less important groups of traders and 
hence to pockets of non-compliance. 
These common trends in the environment and working methods of VAT 
administrations are not present to the same extent in all Member States. The 
Commission considers that most of these are likely to result in enhanced, similar 
levels of effectiveness, and therefore suggests that administrations, recognising these 
trends, evaluate and take into account, where applicable and in the context of 
national specificities, the following orientations: 
6.2. SUGGESTIONS FOR IMPROVEMENT 
1. General objectives 
1.1. Continue to improve services for taxpayers 
• the further development of measures that allow taxable persons to 
familiarise themselves regularly with changes in VAT legislation or 
their tax responsibilities; 
• by creating contact points for taxable persons; 
• and by making less burdensome the submission of returns and 
payment of tax 
1.2. Develop preventive analysis/action plans to prevent or minimise 
taxpayer non compliance 
• telephone calls to prevent delays or defaults on payments, or by 
early visits to new enterprises 
1.3. Pursue, develop computerisation, reorganisation/ rationalisation of 
procedures to ensure cost-effectiveness 
• ensure that information is supplied in an appropriate format to the 
most appropriate responsible officer to maximise the benefits of 
decision making 
1.4. To improve the co-ordination and effectiveness of services in charge 
of complementary procedures or other taxes 
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39 
1.5. To continue to improve administrative co-ordination, and co­
operation in control and recovery. 
• encourage the use of standardised procedures and techniques 
1.6. To continue to develop and improve staff training programmes in a 
number of areas: 
• procedures to be used in controlling large traders and those 
undertaking intracommunity transactions 
• to ensure the most cost effective use of computer aids 
• to maximise the benefit and use of risk analysis techniques 
2. Computerisation 
2.1. Evaluate, on the basis of cost-benefit, the likely impact of the 
extension of computerisation to those areas in which not yet 
introduced and in particular, to 
a) resource allocation and monitoring 
b) networks linking central and local offices 
c) desk audit tools (information checks, trader selection) 
d) Audit visit tools (expert systems, file interrogation systems) 
3. Decentralisation 
3.1. Disseminate available intelligence appropriately to staff responsible 
for decision making 
3.2. Issue control/debt management manuals, specific audit programmes 
(expert systems) so as to ensure consistency in approach, equal levels 
of work efficiency, and the equitable treatment of taxpayers. 
3.3. Ensure adequate feed-back of results to facilitate monitoring and 
evaluation 
4. Intelligence gathering, risk assessment 
4.1. Ensure systematic thorough intelligence gathering on operations of 
traders and risks of certain categories of traders (e.g. trade sectors) 
4.2. Analyse information gathered on specific trade categories so as to 
produce: 
• comprehensive information on each group 
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40 -
• an awareness of the operational environment and specific control 
risks 
• manuals and audit programmes that allow staff to tailor more 
general control programmes to specific requirements 
4.3. Ensure risk criteria are broadly based assessing both financial risks 
and general compliance (evasion) risks 
5. Control orientation 
5.1. Undertake the analysis and selection of groups of or individual traders 
by categories using clear and standardised transparent trader selection 
rules that appropriately incorporate an awareness of risk criteria. 
5.2. Set up special programmes to tackle the most relevant risks: 
a) risks which require prompt control/debt management action (e.g. 
phoenix companies, imminent bankruptcy) 
b) risks requiring specific specialised techniques (e.g. specific trade 
sectors, systems-based audit). 
5.3. Maximise the use of both standardised audit programmes and modern 
accounting and auditing computer software to facilitate the 
monitoring and evaluation of results. 
5.4. Integrate/closely control the administration of VAT with that of other 
taxes 
5.5. To effectively combine the use of control instruments (or techniques) 
available 
• in-depth controls to monitor all taxes of a trader over a certain 
period 
• frequent controls targeted on an individual tax or control area (e.g. 
new traders, VAT refunds) 
6. Debt management orientations 
6.1. To co-ordinate control and recovery responsibilities and ensure 
regular contacts between the administration and taxable persons to 
obtain better intelligence on taxable persons at risk of default, to 
allow improved monitoring, and assist quicker preventive action: 
• use of advanced reminders 
• enforcement action without delay 
6.2. To reduce the costs of recovery of low value debts using simplified 
procedures such as the recovery of amounts owed from the bank 
accounts of taxable persons. 
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41 -
6.3. Make sure delayed-payment arrangements 
• are granted only in cases where the (rescheduled) debt is 
recoverable 
• are not competitive sources of financing for taxable persons 
(through guarantees, higher than commercial interest rates, short 
periods) 
• are granted so to shortest possible length of time. 
6.4. Revive debt written off in case of renewed trading while taking care 
not to discourage new ventures 
7. Evaluation, performance indicators 
7.1. To pursue the development of clear objectives for the administration 
of VAT covering a range of cost and compliance matters. 
7.2. To develop broad range of targets and indicators of performance that 
measure not only aspects of administrative cost efficiency but also the 
taxable persons costs and overall compliance levels. 
7.3. To establish the use of standardised evaluation and reporting of 
results that allows a consistent and accurate information base for the 
review of performance. 
7.4. Develop the overall monitoring and management of quality and 
efficiency of work performed and the equity of treatment of taxable 
persons in the national territory. 
6.3. FOLLOW UP 
The Commission intends to promote these improvements through measures both on 
a regulatory level and an operational one: 
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-42-
1. On a regulatory level the Commission has already put forward such a 
proposal as an amendment to paras 2. and 3. of Article 12 of Regulation 
1553. n 
The Commission proposal would imply that its current activity under Article 
12 would be complemented with visits to Member States administrations in the 
context of systems audits of VAT procedures. Audit plans would be concerted 
with national administrations. The potential improvements identified would be 
discussed, as presently, with the administration concerned. 
In case systems audits results showed important differences in effectiveness, 
the Commission could consider the issue of recommendations to the Member 
States concerned. 
Such amendment recognises the generally coincident interests of the Union and 
Member States in effective VAT administration, and the potential for co­
operation between the Commission and Member States' administrations in this 
area. 
2. On an operational level the Commission intends to contribute towards 
enhancing effectiveness by: 
1. holding regidar meetings with Member States' administrations to consider, 
together with the Member States concerned, the measures implemented 
and those that could contribute to further improvements; 
2. continuing the programme of seminars for VAT officials on issues relevant 
to the improvement of the above mentioned procedures, and support 
similar initiatives taken by Member States themselves. Particular attention 
will be given in these seminars to the analysis of actual and potential 
improvements in specific procedures. 
3. promoting the collaboration between Member States administrations in 
the development of common projects aimed namely at the analysis of 
specific trader populations, specific forms of non-compliance, and 
H The amended text as proposed by the Commission now reads: 
"1. The Member States shall provide the Commission with information concerning the 
procedures which they apply for registering taxable persons and determining and 
collecting VAT and on the modalities and results of their VAT control systems. 
2. The Commission may carry out spot checks on the national authorities to verify the 
procedures, modalities and results referred to in paragraph 1. 
The Commission shall consider, together with the Member State concerned, whether 
improvements to these procedures can be contemplated with a view to increase their 
effectiveness. To this end, the Commission shall, where appropriate, submit 
recommendations to the Member States concerned. 
3. The Commission shall produce a report every three years on the procedures applied in 
Member States and on any improvements that are contemplated, accompanied, where 
appropriate, by recommendations from the Commission with a view to increasing their 
effectiveness. " 
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-43 -
developing common evaluation indicators expressed as far as possible in a 
quantitative manner. 
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Table 1 
VAT in the Community and in the Member States 
Community Own Resources by source of revenue 1991-1994 
1991 1992 1993 1994(1) 
Community revenue % % % % 
Agricultural levies 4,4 3,3 2,9 2,9 
Custom duties 20,4 18,9 16,8 18,0 
VAT own resources 53,8 58,0 52,5 51,3 
4th resource (GNP) 13,2 13,9 25,2 27,0 
Miscelleneous | 8,1 5,8 2,6 0,7 f^ 
(1) Budget 1994. 
Community revenue 1993 
by souroe of Community revenue, % of total revenues 
4th resource (GNP) 
27% Agricultural levies 
3% 
R88S88888 Custom duties 
18% 
VAT own resources 
52% 
Source: Vade-Mecum budgétaire CE. 
Ln 
Table 2 
Amount of VAT own resources paid by Member States 
to the Community Budget (1991 - 1993), Mio. ECU 
Member State 
B 
DK 
D 
GR 
E 
F 
IRL 
I 
L 
NL 
P 
UK 
Total EUR 12 1991 
1022,6 3,4% 
608,9 2,0% 
8736,8 28,9% 
469.1 1,6% 
29773 9,8% 
7083,3 23,4% 
231.2 0,8% 
5215.0 17,2% 
68,9 0,2% 
1609.1 5,3% 
392,0 1,3% 
1841,8 6,1% 
30255,9 100,0% 1992 
1108,1 3,2% 
618,0 1,8% 
10183,2 29,2% 
508.8 1,5% 
35333 10,1% 
7508,1 21,6% 
248,3 0,7% 
5278.0 15,2% 
79,3 0,2% 
1700,7 4,9% 
469.9 1,3% 
3600,9 10,3% 
34836,6 100,0% 1993 
10293 3,0% 
626,4 1,8% 
10565,2 30,6% 
616,7 1,8% 
3304,7 9,6% 
6812,9 19,8% 
282.4 0.8% 
6247,2 18,1% 
114,3 0,3% 
1813,5 5,3% 
527,7 1,5% 
2549,4 7,4% 
34489,9 100,0% 
Source: Compte de gestion de la CE. 
Note: The figures include the balances and the UK correction 
THE AMOUNT OF VAT OWN RESOURCES PAID BY MEMBER STATES IN 1993. 
% SHARE OF EUR 12 TOTAL 
36,0% 
26,0% + 
20,0% + 
16,0% 
IRL 
B OK IRL I 
Table 3 
VAT Revenue collected in Member States 
VAT revenue 
as % of total tax revenue (1) 
1991/1992 
I VAT Total VAT as % 
revenue tax rev. of total tax 
bn. ECU bn. ECU revenue 
B 13,0 77,3 16,8 
DK * 9,8 50,6 19,4 
D 103,4 636,9 16,2 
GR * 6,1 23,5 26,0 
E 28,0 163,4 17,1 
F 77,7 446,6 17,4 
LRL * 2,8 13,5 20,7 
I 55,7 395,8 14,1 
L • 0,6 3,7 15,2 
NL 19,6 118,4 16,5 
P * 3,7 19,8 18,8 
UK 56,4 273,9 20,6 
EUR 121 376,7 2223,3 16,9 
• = 1991 
(1) Total tax revenue is represented by: taxes 
production and imports; taxes on income and 
actual social contributions; capital taxes. linked to 
wealth; 
VAT REVENUE AS % OF TOTAL TAX 
REVENUE 
YEARS 1991/92 Total tax revenue 
as % of GNP 
1991/1992 
Total tax 
revenue as 
% of GNP 
B 45,7 
DK * 48,0 
D 42,5 
GR * 41,1 
E 36,8 
F 43,7 
LRL * 37,1 
I 41,9 
L * 48,8 
NL 47,8 
P * 35,7 
UK 34,0 
EUR 12 41,2 
1991 VAT revenue as 
% of GNP 
1991/1992 
I VAT 
revenue VAT as % 
bn. ECU of GNP 
B 13,0 7,7 
DK * 9,8 9,3 
D 103,4 6,9 
GR * 6,1 10,7 
E 28,0 6,3 
F 77,7 7,6 
LRL * 2,8 7,7 
I 55,7 5,9 
L * 0,6 7,4 
NL 19,6 7,9 
P * 3,7 6,7 
UK 56^4 7^0 
EUR 12 1 376,7 7,0 
1991 
VAT REVENUE AS % OF GNP 
YEARS 1991/92 
Souroe: Suivi du Livre BI«no CE. 
Table 4 
Micro, small, medium-sized and large businesses in each country as % of total micro, small, 
medium-sized and large businesses in the entire European Union 
(industrial sector construction included) 
1990 
B 
DK 
D 
GR 
E 
F 
IRL 
I 1989) 
L 
NL 
P 
UK 
Total Micro 
No % of 
of units turnover 
94067 14 
37240 13 
347605 7 
NA. 
477631 
416882 9 
1636 
320233 14 
1449 
55503 
165803 9 
839855 9 
2757904 Small 
No % of 
of units turnover 
9919 23 
7408 32 
117719 16 
7587 39 
61024 
59124 21 
2569 
93972 37 
627 
14883,05 
19217 30 
50713 20 
444762 Medium-size 
No % of 
of units turnover 
1081 21 
641 26 
10678 18 
507 42 
3227 
5807 20 
404 
5104 22 
83 
1734 
1830 28 
5016 15 
36112 Large 
No % of 
of units turnover 
219 42 
110 28 
2239 59 
60 18 
481 
1210 50 
38 
734 27 
11 
0 
245 34 
1404 56 
6751 Total 
105286 
45399 
478241 
8154 
542363 
483023 
4647 
420043 
2170 
72120 
187095 
896988 
3245529 
Note: Enterprises for GR and IRL only include NACE 1-4. Enterprises for NL only include NACE 2-4. 
Note: Turnover for DK and I only include NACE 2-5. Turnover for GR only include NACE 1-4. 
Note: For GR the turnover for medium enterprises includes turnover from large enterprises within NACE 1. 
Note: The figures for D include only WestGermany and WestBerlin. 
35 
30 
25 
5 20 
o 
g 15 
10 
5 
0 BUSINESSES IN INDUSTRIAL SECTOR (INCL CONSTRUCTION) 1990 
MICRO • SMALL MEDIUM • LARGE 
TURNOVER IN INDUSTRIAL SECTOR (INCL. CONSTRUCTION) 1990 
MICRO • SMALL MEDIUM LARGE 
Table 5 
THE PROPORTION OF THE NUMBER OF BUSINESSES IN SENSITIVE SECTORS AND THEIR TURNOVER. 1990 
Member State Number of 
businesses Turnover of 
businesses Number in 
"sensitive" 
sectors Turnover in 
"sensitive" 
sectors Pet of total 
"sensitive" 
sectors Pet. of turnover 
"sensitive" 
sectors 
"lo" 
72 
66 
n.a. 
75 
71 
n.a. 
82 
76 
60 
76 
75 B 
DK 
D 
GR 
E 
F 
LRL 
I* 
L 
NL 
P 
UK 487.654 
154.090 
2.045.435 
8.364 
2.258.172 
1.975.747 
4.804 
1.590.811 
15.321 
397.864 
" 603.285 
2.659.952 354.174 
163.961 
2.501.439 
22.091 
n.a. 
1.770.877 
n.a. 
1.294.222 
n.a. 
n.a. 
133.426 
n.a. 371.419 
110.594 
1.355.477 
n.a. 
1.683.833 
1.401.651 
n.a. 
1.310.664 
11.604 
238.136 
459.093 
1.985.668 195.052J 
104.760] 
1.187.416J 
n.a. | 
n.a.j 
864.083] 
n.a. | 
705.368] 
n.a.] 
n.a.| 
66.411; 55 
64 
47 
n.a. 
n.a. 
49 
n.a. 
55 
n.a. 
n.a. 
50 
n.a. 
Total 12.188.331 6.218.099 8.928.139 3.123.090! 73 50 
Note: 
Note: 
Note: 
Note: Figures for Italy are from 1989. 
The member states use the following units: 
Enterprises D, E, F, I, L, P and UK 
VAT-units B 
Legal units DK 
Economic units NL 
It is not possible to generate figures for "sensitive sector" for GR and IRL. 
The figures for D include only WestGermany and WestBerlin. According to Finanznachrichten 
no. 57/93 from Bundesministerium der Finanzen there existed 3.998.371 businesses in the whole of 
Germany in 1990. 
THE PERCENTAGE NUMBER AND TURNOVER OF BUSINESSES IN "SENSITIVE" SECTORS FOR EACH 
MEMBER STATE 
% of number % of turnover 
a 
KEY TO TABLES 4 and 5 
Source: European Commission: Enterprises in Europe - Third Report, vol. I 
and II, 1994 
Definitions: 
Industry: NACE 1-4 
• Energy and water 
• Extraction and processing of non-energy-producing minerals 
and derived products; chemical industry 
• Metal manufacture; mechanical, electrical and instrument 
engineering 
• Other manufacturing industries 
Construction: NACE 5 
• Building and civil engineering 
"Sensitive" sectors: NACE 5, 6, 7, 9 
• Building and civil engineering 
• Distributive trades, hotels, catering, repairs 
• Transport and communication 
• Other services 
Size: Micro: 
Small: 
Medium: 
Large: 
Figures: 0-9 
10-99 
100-499 
Over 500 employees 
employees 
employees 
employees 
The statistics in this report relate to the year 1990. 
TABLE 6 
Functions 
Registration 
Note 2 
Assessment 
Note 2 
Recovery 
^Enforcement 
Note 2 
Control 
Note 2 VAT ADMINISTRATION IN MEMBER STATES- ANALYSIS OF DEPARTMENTAL RESPONSIBILITIES BY FUNCTION. 
B 
1. the 241 VAT control offices 
2. the central VAT office for taxable 
persons resident abroad (BCAE) (1) 
1. S L 
2. S L 
1. the 241 VAT control offices 
2. BCAE 
3. Customs and Excise Department 
(C&Edept.)(2) 
1. S L 
2. S L 
3. J L 
1. the collection offices 
2. the 2 regional information 
processing centres (CTRI) 
3. the information processing centre 
(CTI) 
4. C&Edept. 
1. S L 2. S B 
3. S C 4. J L 
1. the 241 VAT control offices 
2. BCAE 
3. the 11 VAT investigation and 
documentation departments (SRD) 
4. the Special Inspectorate of Taxes 
Department 
5. C&Edept. 
6. the 233 registration offices (3) 
1. S L 2. S L 
3. S L 4. J L 
5. J L 6. J L Notel 
A), B), C) . 
A),B),C) 
A),B),C) 
A),B),C) 
A),B) 
A),B),C) 
A),B),C) 
A),B),C) 
A),B) 
A),B),C) 
A),B),C) 
A), B), C) 
A),B),C) 
A),B) 
A) DK 
1. Administration 
department 
1. J L 
1. Administration 
department 
2. Legal department 
1..JB 
2. J B 
1. Administration 
department 
2. Control and 
Enforcement 
Department 
1. J B 
2. .IB 
1. Control and 
Enforcement 
Department 
1. J B Notel 
A), B), C) 
A), B), C) 
A),B),C) 
A), B), C) 
A),B),C) 
, A), B), C) D 
1. Finanzâmter 
1. J L 
1. Finanzâmter (1) 
1. J L 
1. Finanzâmter 
1. J L 
1. Finanzâmter (2) 
1. J L Notel 
A), B), C) 
A),B),C) 
A),B),C) 
A), B), C) GR 
1. Ministry of Finance 
Information Technology 
Service (MFITC) 
1. J C 
1. Competent Head of 
Public Finance 
Department (PFD) 
2. Customs Offices 
1. C,L 
2. C,L 
1. State Revenue Offices 
(PFD) 
2. Customs Offices 
1. C,L v 
2. C, L 
1. PFD 
2. Dept. of Precautionary 
Control of the Movement 
of Goods 
3. Customs Offices 
1. C,L 
2. C,B Notel 
A), B), C) 
A),B),C) 
C) 
A),B),C) 
Q 
A),B),C) 
A) 
B), C) 
Note 1: 
A) Taxable persons performing domestic transactions 
3) Taxable persons performing Intra-community transactions 
C) Taxable persons performing transactions with 3rd countries 
Source: Member States Response to E.C. Questionnaire 199.4 Note 2: 
S VAT Administrated singly 
J VAT Administrated jointly with other taxes 
C VAT Administrated centrally 
L VAT Administrated locally 
B VAT Administrated both centrally and locally 
TABLE 6 
VAT ADMINISTRATION IN MEMBER STATES-ANALYSIS OF DEPARTMENTAL RESPONSIBILITIES BY FUNCTION. 
Functions 
Registration 
Note 2 
Assessment 
Note 2 
Recovery 
^Enforcemen 
t 
Note 2 
Control 
Note 2 E 
1. Tax Administration 
Department ( 1 ) 
2. Customs & Excise 
Department (1) 
1. J B 
2. J C, L 
1. Tax Administration 
Department 
2. Customs & Excise 
Department (1) 
1. J C, L 
2. C, L 
1. Collection Department 
2. Customs & Excise 
Department (1) 
1. J C, L 
2. C, L 
1. Financial and Tax 
Inspection Department 
(2) 
2. Customs & Excise 
Department 
1. J C, B 
2. C, B Notel 
A),B) 
C) 
A), B),C) 
C) 
A), B),C) 
C) 
A), B),C) 
C) F 
1. Directorate-General for 
Taxation ( DGI ) 
2. Directorate-General for 
Customs and Indirect 
Duties ( DGDDI ) (1) 
1. J L 
2. J L 
1. DGI 
2. DGDDI 
1. J L 
2. J L 
1. DGI 
2. DGDDI 
1. J L 
2. J L 
1. DGI 
2. DGDDI 
1. J L 
2. J L Note 1 
A), B), C) 
C) 
A), B), C) 
C) 
A), B), C) 
C) 
A), B), C) 
B),C) IRL 
1 Office of Chief 
Inspector of Taxes 
1 J B 
1 Office of Chief 
Inspector of Taxes 
1 J B 
1 Collector -Generals 
office 
2 Customs and 
Excise for VAT on 
Imports 
1 J B 
2. S B 
1 Office of Chief 
Inspector of Taxes 
1 J B Note 1 
A), B), C) 
A), B), C) 
A), B), C) 
C) 
A), B), C) I 
1 VAT Offices 
2 Customs 
1 S L 
2. 
1 VAT Offices 
2 Customs 
1 S L 
2. 
1 VAT Offices 
2. Agents Enforcement dept. 
3. Customs 
1 
2 
3 
1 
2 
3 
4 
5 
6 
1 
3 
5 S L 
J L 
VAT Offices 
Guardia Finanza (1) 
SECIT 
Revenue Department 
Regional Directorates 
Customs 
S L 2. J L 
J C 4. S C , 
S L 6. Notel 
A),B) 
C) 
A),B) 
C) 
A),B) 
A), B), C) 
C) 
A), B), C) 
A), B), C) 
A), B), C) 
A), B), C) 
C) 
B),C) 
Note 1: 
A) Taxable persons performing domestic transactions 
B) Taxable persons performing Intra-community transactions 
C ) Taxable persons performing transactions with 3rd countries 
uurce: Source: Member States Response to E.C. Questionnaire 1994 Note 2: 
S 
J 
C 
L 
B VAT Administrated singly 
VAT Administrated jointly with other taxes 
VAT Administrated centrally 
VAT Administrated locally 
VAT Administrated both centrally and locally 
TABLE 6 
VAT ADMINISTRATION IN MEMBER STATES- ANALYSIS OF DEPARTMENTAL RESPONSIBILITIES BY FUNCTION. 
Functions 
Registration 
Note 2 
Assessment 
Note 2 
Recovery 
+ Enforcement 
Note 2 
Control 
Note 2 L 
1. Tax offices 
2. State Computery 
Centre (CLE.) 
1. S L 
1. Tax offices 
1. S L 
1. Central Revenue 
Office 
1. S C 
1. Tax offices 
2. External Inspection 
1. S B 
2. S B Note 1 
A), B), C) 
A), B), C) 
A), B), C) 
A), B), C) NL 
1. Business units 
2. Units for large 
business 
3. District Customs 
Offices 
1. JL 3. J L 
2. J L 
1. Business units 
2. Units for large 
business 
3. District Customs 
Offices 
1. JL 3. J L 
2. J L 
1. Business units 
2. Units for large 
business 
3. District Customs 
Offices 
1. JL 3. J L 
2. J L 
1. Business units 
2. Units for large 
business 
3. Central unit for 
intra-community 
transactions 
1. J L 3. S C 
2. J L Notel 
A), B), C) 
A), B), C) 
•C) 
A), B), C) 
A), B), C) 
C) 
A), B), C) 
A), B), C) 
Q 
A), B), C) 
A), B), C) 
B) P(D 
1. Finance Division 
1. J B 
1. Finance Division 
2. Registration Dept. 
Directorate 
1. J B 
2. S B 
1. Finance Division 
2. VAT Recovery Dept. 
Directorate 
3. Directorate General for 
Customs for imports 
1. J B 3. J L 
2. J B 
1. Directorate for Tax 
Inspection and Protection 
Depts. 
2. District Finance 
Directorates by TAX 
Inspection Division 
3. Directorate General for 
Customs for imports 
1. J B 3. J L 
2. J B Notel 
A), B), 
Q 
A), B), 
Q 
A), B), 
C) 
A),B) 
A),B) 
C) 
A),B) 
A),B) 
C) UK 
1. HM CUSTOMS AND 
EXCISE, VAT Practice 
Directorate (HM C&E, 
Pract. Dir.) (1) 
1. S B 
1. HM C&E, Pract. Dir. 
1. S B 
1. HM C&E, Pract. Dir. (2) 
1. S B 
1. HMC&E 
2. 90 Offices controlling 1,6M 
traders and 22 Large 
Traders Units controlling 
167 traders. 
3. 90 Offices controlling 185 
000 traders and 22 Large 
Traders Units controlling 
150 traders 
1. S B 
2. S B Notel 
A), B), C) 
A), B), C) 
A), B), C) 
A), B), C) 
A 
B),C) 
Note 1: 
\ ) Taxable persons performing domestic transactions 
3) Taxable persons performing Intra-community transactions 
) Taxable persons performing transactions with 3rd countries 
itrce: Source: Member States Response to E.C. Questionnaire 1994 Note 2: 
S 
J 
C 
L 
B VAT Administrated singly 
VAT Administrated jointly with other taxes 
VAT Administrated centrally 
VAT Administrated locally 
VAT Administrated both centrallv and locallv 
s"? 
_4 - à J 
TABLE 6 
VAT ADMINISTRATION IN MEMBER STATES- ANALYSIS OF 
DEPARTMENTAL RESPONSIBILITIES BY FUNCTION. 
Notes 
B 
(1) The central VAT office for taxable persons resident abroad is responsible for the registration of taxable 
persons established outside Belgium and not possessing a permanent establishment there. It is also 
responsible for the approval of competent representatives Registration involves: a) figures being gathered at 
local level:, b) database run at national level. 
(2) The Customs and Excise Department is involved in establishing the VAT on imports, tobacco manufactured 
within the country and mineral oils. 
(3) The registration offices are involved in the case of the sale of a new building with application of VAT. 
DK 
The regional customs and tax offices are free to choose local organisation and structures. However, the 
structure chosen must always be adapted to the tasks entrusted to the offices and should contain at least a 
collection office and a controls and inspection department. 
To some extent, the administration delegates specific duties of a central nature to one or more regional offices 
which will cany out these tasks at a national level. 
All controls of intra-Community trade are conducted by the individual regional office. CLO is delegated to one 
of the regional customs and tax offices in Copenhagen and consists merely of passing on information between 
the countries and producing statistics. 
Some training for Administration staff is provided by eight regional braining offices which are also responsible 
for training the staff of the regional offices covered by the appropriate training office. 
D , 
(1) Where tax offices have a provisional returns unit, they only deal with VAT cases. 
(2) Where tax offices have a special inspection unit, they only deal with VAT cases. 
£ 
- There is no distinct structure dealing with Value Added Tax. 
- The Regional Finance Offices, Provincial Finance Offices and Local Finance Offices form part of the 
peripheral organisation of the State Tax Administration Agency (A.E.A.T.).Each Regional Finance Office 
covers the territory of an Autonomous Community, the Provincial Finance Offices, correspond to the 
provincial structure of the State and the Local Finance Offices exercise their functions at the level below the 
provincial. 
- These peripheral bodies perform the functions of tax administration, control and collection in a decentralised 
way. 
(1) Taxable persons who come under special schemes for farming, stock-farming and fishing and retailers 
under special schemes are excluded, since they no longer submit periodical VAT returns-assessments. 
(2) There are units covering the whole of the national territory which are responsible for actions relating to 
large tax-payers (inspection) and to actions for recoveiy of major sums (collection). 
I 
(1) DGDDI ,The customs authority receives VAT on goods imported either commercially or by travellers, and 
on imported petroleum products. An accounting network of 292 offices through the country (both border 
posts and offices in the interior), oversees the collection of the tax . 
-5- J y 
i 
Structure and composition of the Guardia di Finanza 
The total number of staff allocated to the Guardia di Finanza to perform its duties stood at 650348 on 1 January 
1993. This was made up of 2 489 officers, 25 950 non-commissioned officers, 37 807 lance corporals and 
customs officers. 
It is structured as follows: central headquarters, branch operational units and training units. 
More particularly: a) Central headquarters, which is the controlling authority of the organisation is made up 
of divisions, offices and units responsible for the running of the orgamsation. 
b) Branch operational units are made up of: (1) 15 Area Commands under a Brigadier, 
usually covering the Regions or equivalent territorial area, and controlling: 20 legions, 1 
central squad and 13 regional squads of the Polizia Tributaria (fiscal police), 1 special 
squad of the Polizia Valutaria (monetary police) covering the whole country, 1 central 
investigation service for organised crime, 1 anti-fraud centre; (2) 1 Air and Sea Unit 
with its headquarters in Rome, responsible for: the Pratica di Mare aviation centre, the 
Gaeta naval centre. 
In the country, apart from the regional and central squads already mentioned, which are the 
units specialised in combating tax evasion, the organisation centres around the Legion 
headquarters which govern, at a lower level, the executive divisions of the service. Among 
these, a particularly important role is played by the provincial units of the Polizia Tributaria 
stationed in the administrative capital of each province. 
P 
Registration (c) Registration for VAT is done by submitting a declaration of commencement of business to the 
relevant Repartiçâo de Finanças (finance division). It is computer-processed by the Direcçâo de Serviços do 
Cadastra (directorate for registration departments) - Divisao do Cadastra do IVA (VAT register division). The 
declaration of commencement of business serves for both VAT and income tax. 
Assessment (c) Assessment is handled in its initial phase by the finance divisions which monitor taxable 
persons on the basis of the data on the declaration of commencement of business. 
Recovery + Enforcement (c) Normal VAT recovery in respect of the monthly and quarterly periodic returns is 
centralised and computerised in Lisbon at the Direcçâo de Serviços de Cobrança do Imposto sobre o Valor 
Acrescentado (directorate for VAT collection departments) which receives the returns and the means of 
payment and processes them by computer. Tax due from persons covered by the simplified arrangements for 
small businesses (small retailers scheme provided for in Article 60 ff. of the VAT Code) is paid to the finance 
divisions. Enforcement is handled by the local divisions (finance divisions and public finance departments), 
such as recovery of additional amounts due following inspections, underpaid amounts and payments 
compulsorily deducted. VAT due on imports is collected by the various customs offices, which are also 
responsible for recovery of other taxes such as special taxes on consumption (excise). 
UK 
(l)The registration function is carried out through a network of local VAT Offices, and two centralised 
processing units. Overseas traders who do not have a place of business, or a tax representative in the UK are 
dealt with by the local Office in Aberdeen. 
(2) The VAT debt is mainly managed by through the network of 83 local VAT Offices. However some debts are 
managed centrally, e.g. insolvent debts of large payers. 
HM Customs and Excise - VAT Practice Directorate. Roles and responsibilities 
VAT Strategy and Planning Services (VSPS): VAT business strategy, including image of the tax, quality 
issues, tax charter, deregulation; information systems strategy including IT; strategic initiatives including 
personnel policy and project management. 
VAT Registration and Collection Policy (VRCP): Registration/deregistration policy, Agricultural Flat Rate 
scheme; special schemes arid small businesses; tax structure, VAT tribunals; VAT policy on imports, exports, 
new means of transport; VAT insolvency, Bad Debt Relief policy. 
VAT Management Division (VMD): Control policy, trade category exercise, multinationals, large traders, 
insolvent traders; Debt management policy, security, distress, civil recovery; Training policy for control, debt 
management and Local VAT Office Investigation Teams (LVOITs); IT developments to support staff in Local 
Offices, local visit selection, VATPACE and VIES (including European Sales Listings (statistics)); 
Assessment, penalty and offence policy, criminal offences casework; compliance; tax yield indicator, 
monitoring and development of performance indicators, credibility and risk analysis policy. 
VAT Operations Division (VOPS) 
Finance and resourcing; accounting adjustments, error return correction, annual accounting and repayment 
compensation cases, credibility processing; VAT Infrastructure Project, liaison with Departmental Information 
Technology Division; insolvency casework and helpdesk, Large Payers Unit, surcharge appeals, Insolvency Act 
Team (IAT); ESLs, Statistical Liaison. 
TABLE 7 
VAT ADMINISTRATION IN MEMBER STATES- HUMAN RESOURCE UTILISATION 
Member 
States 
B 
DK 
D 
GR 
E 
F 
IRL 
I 
L 
NL 
P 
UK 1. Total departmental staff 
4188 
4 583 (Regional Customs & 
Tax Offices) (1) 
+ 581 (Central Customs 
and Tax Administration) 
(2) 
115.853 
(Tax offices only as at 
31.12.1992) 
5 650 
26 600 
80 283 ( DGI ) 
6011 
66.256 (Guardia di 
Finanza) 
251 
4 656 
515 
26725 2. Number of/proportion 
of total staff (col 1) 
allocated to VAT 
VAT Adm.: 3.883 
Customs Adm.: 115 
I.S.I. Adm.: 140 
71.828,86 = 62% 
staff allocated to VAT 
20.563,91 = 17,8% 
(estimate) 
3 450 
not applicable 
not applicable 
651 
6123-(VAT Offices) 
118 
not applicable 
432 
12765 (of which 750=HQ 
staff) 3. Analysis of staff employed on VAT (col 2) 
A. 
General administration 
duties 
Central Adm.: 277 
C.F.P.:29 
Regional Dir.: 265 
17.377,95 =24,2% (est.) 
4.344,49 = 21,1% (est.) 
50 
31 
1.888 (VAT Offices) 
85 (jointly with B) 
69 
2498 (not including HQ 
staff) B. 
General control duties 
External services: 1096 
Inspections: 41 
Customs: 115 
28.383,99 = 39,5%(est.) 
8.833,79 = 43% (estimate) 
3 300 
4 500 
329 
4234 ( VAT Offices) 
Guardia di Finanza: 2.489 
officers, 25.950 non­
commissioned officers, 
37.0807 lance corporals 
and custom officers 
106 (jointly with A) 
363 
3827 C. 
VAT inspection 
Control staff: 1581 
I.S.I. Adm.: 140 
S.R.D.: 109 
12.743,83 = 17,7% (est.) 
4.054,86 = 19,7% (est.) 
50 
291 
2427 
2 
5650 4. Further analysis 
D. 
Recovery and enforcement 
duties 
Collection offices: 417 
CTI and CTRL 68 
13.323,10 = 19,6% (est., 
not contained in A ,B or C) 
3.330,77 = 16,2% (est., not 
contained in A, Bor C) 
2 200 
3 800 
10 347 (accounting network 
DGI in 1992) 
108 
504 ( VAT Offices) 
15 
78 
0,1% 
Notes 
DK: ( 1 ) people working with VAT and other taxes 
(2) people working with all taxes 
Guide to table 
Col 1 
Col 2 
Col 3 
Col 4 The staff number in this column represents the total strength of the administrative department (s) responsible for VAT matters (singly or jointly). 
This column states the total n° of staff directly involved in VAT work. If the department is responsible for more than one tax it indicates the proportion of the total (col 1 ) staff so employed. 
Analysis of the total of staff for col 2 by the duties upon which they are employed. 
Identifies the number or proportion of staff analysed for A, B, C involved primarily in recovery' and enforcement of VAT debt. 
Source: Member States Response to E.C. Questionnaire 1994 
TABLES 
VAT ADMINISTRATION TRAINING IN MEMBER STATES - GENERAL TRAINING COURSES 1991 -1993 
B (1) 
DK 
D 
GR 
E 
F DGI 
F DGI 
F DGI 
IRL 
I (D 
L 
NL 
NL 
NL 
P 
UK 1991 
1992 
1993 
1991 
1992 
1993 
1992 
1993 
1991 
1992 
1993 
1991 SPECIFIC INITIAL TRAINING 
(i) 
1 
1 
1 
13 
10 
13 
366 
126 
25 
23 
5 
2 
DGDDI j 4 
1992 
DGDDI 
1993 
DGDDI 
1991 
1992 
1993 
1991 
1992 
1993 
1991: 27 stud. 
1992: 75 stud. 
1993:69 
1991: 46 stud. 
1992: 32 stud. 
1993: 10 stud. 
1991: 49 stud. 
1992: 49 stud. 
1993: 35 stud. 
1991 
1992 
1993 
1991/1992 
1993 2 
4 
5 
5 
13 S.C&L 
6 S.C&L 
15S.C&L 
2S&J 
2S&J 
2S&J 
18 months 
(MBO): 
3 year (HBO): (ii) 
34d 
34d 
34d 
52 
60 
60 
50min. 
50min. 
45 
45 
50 
6 
S 8 Oh cat. A 
J18h 
J70H catB 
24 
6 
S 76h catA 
J26H 3cat.A 
J78h catB 
24 
12 
S 90h catA 
J21h cat.B 
J78h cat.B 
35 
21 
2 
15 
36/18h 
36/18h 
36/18h (iii) 
150 
155 
400 
40 
30 
24 
See Notes 
840 
200 
658 
577 
115 
25 
541 cat. A 
712 catB 
579 
780 catA 
954 catB 
630 
86 
786 catA 
742 catB 
472 
195 
87 
209 
6/6 
10/9 
9/5 INTERMEDIATE GENERAL TRAINING 
(i) 
2 
2 
2 
5 
4 
4 , 
27 
135 
85 
105 
140 
4 
38 
81 
32 
3 
3 
83 
44 
3 
11 
11 
79 
84 
10 
1 
1S&J 
1S&J (ii) 
30 
30 
30 
60 
6 
60 
50min. 
50min 
5 
6 
15 
12 
6d 
8d 
18d 
8 
10 
3d 
9d 
14d 
8 
16 
3d 
lid 
23d 
28 
15 
36h 
36h (iii) 
205 
184 
542 
42 
110 
26 
33 
164 
3750 
3820 
5187 
171 
LS 694 
U 1615 
CJ 648 
153 
239 
LS 861 
U 1662 
CJ 879 
150 
796 
LS 220 
U 1718 
CJ 1478 
191 
16 
9 
14 ADVANCED TRAINING 
(0 
1 
1 
2 
288 
21 
30 
32 
3 
6 
3 
7 
9 
576 
16 
1 S&J 
J training at the level of senior secondary vocational education 
J training at the level of higer vocational education 
universitary level training 
9 
9 53 
94 73 
185 
Figures not available 
(1) C 10 | | appr.100 ' 
8 
33 
154 
2 
(2) 13 C 39 
21 
11 
12 
5-15 d 124 
580 
3 489 
49 
appr.120. 1 
(2X3)52 C (ii) 
15 
6 
30 
50min 
15 
10 
12 
8 
18 
8 
16 
16 
3d 
28 
18h(l) 
262 
5- 10 days (iii) 
170 
170 
40 
362 
725 
781 
1015 
153 
196 
150 
264 i 
147 
LS 11 515 
882 
23 
1 152 
Source: Member States Response to E.C. Questionnaire 1994 
TABLE 8 
VAT ADMINISTRATION TRAINING IN MEMBER STATES - GENERAL TRAINING COURSES 1991 - 1993 
Notes 
Column Guide 
i) the number of courses provided (VAT) 
ii) the average length of each course - eg d(day) min (minute), 
iii) the number of staff attending in each year (VAT) 
indicating : 
a) whether the courses are provided singly for VAT or jointly with training for other taxes (S or J) 
b) at what location each course is provided centrally or locally (C or L) 
c) any third party used to provide training. 
B: (1): a) All the courses listed are organised separately for VAT: S 
b) All the courses are organised at local level by the regional vocational training centres: L, with supervision at central level 
c) No recourse is had to third parties. 
- Specific initial training: 
- corresponds to the basic training given to all officials recruited at grade 2 or 3 
-1993 takes account of the integration of officials from the customs department 
- Intermediate general training: 
- corresponds to the training given to officials registered for the examinations for promotion to the grades of assistant 
auditor and auditor and to assistant inspectors and assistant auditors recruited at these grades 
- Advanced training: 
- corresponds to the training given to officials registered for an examination for promotion to the grade of senior inspector 
DK: (i): all courses could be C/L; (ii) hours of lessons 
D : initial training: Theoretical and practical training courses jointly with other taxes provided by experienced staff; 3 years for 
future officials in higher level of which 182 hours theoretical VAT courses; 2 years for future officials in lower level of which 
73 hours theoretical VAT courses; 1 year for future officials in management level. Continuos advanced training on pratical 
problems during activity. 
F: DGI : Directorate General for taxation/DG DDI: Directorale General for customs and Indirect Duties 
I: (1) Staff training on VAT: 
The training of staff working at the Ministry of Finance is usually organised by the Scuola Centale Tributaria "Ezio Vanoni" 
(central tax college), which was set up by Law N° 310 of 10 January 1957 and comes directly under the Ministry. 
The Tax College has its headquarters in Rome and branches throughout Italy. In-house staff training courses have also been 
launched at the initiative of the regional director for training. 
The managing director of the College is a director from the Ministry of Finance, while the College's rector was elected from 
among the University's professors. 
The teaching staff is made up of university professors, magistrates, administrators, state lawyers and civil servants. 
The courses aimed at officials involved in preventing VAT fraud hold a particularly important place among the various 
courses and seminars held at the College. 
All staff working in this area must take a basic course lasting between four and six months, in addition to which at individual 
offices the director or the heads of specific operational areas are responsible for continuing the training so as to keep their 
staff up to date on the various aspects of VAT. 
The basic training course is followed up by specific courses dealing in greater depth with specific areas of the offices' control 
activities as well as courses held when there have been important legislative changes. 
The training programmes also include courses on intracommunity VAT, study of fraud prevention techniques and 
computerised systems. 
L: (1) training provided by a third party 
UK: (1) Basic VAT Training (BVT) Courses are provided locally by each Executive Unit. .No figures are available for the number 
of course run locally, or the number of staff attending. Courses run over a period of nine months and involve approximately 
10 weeks classroom training interspersed with "on the job" training Centrally run course account for only a few of those 
carried out in any year 
(2) Courses are provided locally by each Executive Unit. .No figures are available for the number of courses run locally, or the 
number of staff attending 
(3) Provided by, the Institute of Chartered Accountants of Scotland, for staff, 
TABLE 9 
VAT ADMINISTRATION TRAINING IN MEMBER STATES - SPECIFIC TRAINING COURSES 1991 -1993 
B 
DK 
D 
GR 
E 
F 
DGI 
F 
DGI 
F 
DGI 
IRL 
I 
L 
NL 
P 
UK 1991 
1992 
1993 
1991 
1992 
1993 
(D(2) 
1991 
DGDDI 
1992 
DGDDI 
1993 
DGDDI 
see table 8 
1991 
1992 
1993 DEBT ENFORCEMENT 
(i) 
8 
17 
11 
67 
2 
4 
55 
6 
4 
51 
34 
5 (ii) 
30 
30 
30 
4d 
14d 
24 
4d 
14d 
24 
4d 
33d 
35 (iii) 
36 
32 
63 
LS 1337 
CS 32 
579 
LS 1103 
CS 115 
630 
LS 1018 
CS 675 
472 VAT CONTROL 
(i) 
1 
1 
13 
13 
15 
9S,C 
13 
54 
4 
3 
13 
42 
3 
3 
13 
31 
2 
10 (ii) 
9 
9 
60 
60 
60 
4d 
18d 
5d 
2d 
8 
21d 
6d 
2d 
8 
lOd 
6d 
2d 
28 
Course content: "Specific initial training" 
Course content: "Specific initial training" 
Course content: "Specific initial training" 
In-service training in addition to the general courses listed above 
1991 
1992 
1993 
1991 
1992 
1993 197 
7 
37 16 
18 
11 3 761 
127 
721 
Figures not available 
Figures not available 
Figures not available 34 
31 
4 
See Table 
8 for 
details 40 
27 
14 (iii) 
22 
64 
67 
48 
68 
210 
CJ 266 
LJ 1 079 
LS 81 
153 
CJ 251 
LJ 833 
LS 64 
150 
CJ 263 
LJ 618 
LS 28 
191 
536 
474 
70 USE OF COMPUTERS/RISK 
ANALYSIS (1) 
(i) 
30 
69 
44 
18 
28 
7 
176 
6 
140 
27 
7 
96 
27 
16 
5 S,J 
7 S,J 
11 S,J 
121 
19 
7 
(1) 2 
Centrally 
organised (ii) 
5 
5 
5 
30 
24 
25 
4d 
18 
6d 
2d 
16 
6g 
2d 
28 
24 
24h 
24h 
29 
15 
18 
courses of 
5 days for 
41 staff 
were (iii) 
340 
698 
444 
33 
145 
112 
CJ 2822 
196 
CJ 2248 
LJ 439 
264 
CJ 1 539 
LJ 425 
882 
15 
20 
102 
1479 
198 
101 
completed 
to 31 
March 
1993 * OTHER 
(i) 
1 
1 
2 
5 
8 
1 
-
-(ii) 
5 
5 
2 
60 
60 
21 
-
-(iii) 
1806 
1708 
1666 
48 
31 
10 
-
-
Source: Member States Response to E.C. Questionnaire 1994 QO 
<? 
TABLE 9 
VAT ADMINISTRATION TRAINING IN MEMBER STATES - SPECIFIC TRAINING COURSES 
Notes 
Column Guide 
i) the number of courses provided (VAT) 
ii) the average length of each course 
iii) the number of staff attending in each year (VAT) 
indicating : 
a) whether the courses are provided singly for VAT or jointly with training for other taxes (S or J) 
b) at what location each course is provided centrally or locally (C or L) 
c) use of a third party to provide training. 
Source: Member States Response to E.C. Questionnaire 1994 
B: Debt enforcement: these concepts are integrated into the other types of training. 
VAT control: this training is reserved to the assistant inspectors recruited; the control of intra-community transactions required 
the organisation of special seminars dealing with these matters for 1994. 
Use of computers: entails mainly learning about word-processing (WP and Works), MS DOS and DBase; essentially consists of 
special training on computerised accounting (Cubic), prograrruning. 
Other: this refers only to the special retraining courses given on the new VAT legislation of 1993. 
D: Indications given concern special training for customs officials necessary for research activities required for answers to requests 
under Regulation 218/92/CEE. 
DK a) all courses J / L; (ii) hours of lessons 
E: (1) Although no specific courses in VAT debt enforcement and control have been provided, the public officials posted to the 
Collection and Inspection Divisions take part in the General Courses which relate to aspects of VAT recovery and control 
from a point of view of the total administration of the Tax. 
(2) The School of Public Finance of the Institute of Tax Studies together with the Department of Tax Data Processing of the 
State Tax Administration Agency (A.E. A.T.) have produced a Data-Processing Guide for the New VAT (law 37/92) which 
can be consulted through the terminals which exist throughout the Tax Ad^ninistration (approximately 16,000). There have 
been numerous accesses throughout the network. 
L: ( 1 ) Training provided by IFA or CJJB 
UK: (1) Courses are provided locally by each Executive Unit. No figures are available for the number of course run locally, or the 
number of staff attending 
bo 
TABLE 10 
VAT ADMINISTRATION IN MEMBER STATES- EXTENT OF COMPUTERISATION 
PROCEDURES 
COMPUTERISED (see note 1) 
REGISTRATION OF 
TRADERS (a) 
COMPUTERISED 
PROCESSING OF RETURNS 
(b) 
PERSONALISATION OF 
RETURN FORMS (c) 
LISTING OF TAX 
PAYMENTS BY BANK OR 
ELECTRONIC TRANSFER (d) 
CONTROL OF BANK 
REMITTANCES TO 
TREASURY OR CENTRAL 
BANK 
COMPUTERISED CONTROL 
FOR MISSING RETURNS (e) 
CONTROL OF VAT 
REPAYMENTS 
( see also Annex. 8) 
CONTROL OF INPUT 
TAX CREDITS 
CONTROL OF PENALTY • 
PAYMENTS 
USE IN THE PREPARATION 
OF BACKGROUND NOTES 
FOR CONTROL VISITS 
USE OF EXPERT SYSTEMS 
TO ASSIST IN, ON THE 
SPOT CONTROLS 
INTERACTION WITH OTHER 
TAX DEPARTMENT FILES 
FOR 
COMPARATIVE/CONTROL 
PURPOSES 
OTHER USES - PLEASE 
SPECIFY YES 
B, D, DK, 
GR, E, F, 
IRL, L L, 
NL,P,UK 
B, D, DK, 
GR, E, F, 
IRL, I L, 
NL,P,UK 
B, DK, E F, 
IRL, L, NL, 
P,UK 
B, D, DK, E, 
F, IRL, L L, 
NL,UK 
B, D, , E, F, 
I L, NL, P, 
UK 
B, DK, GR, 
E, F, IRL, I, 
L, NL, P, 
UK,D 
B, D, DK, 
GR, E, F, 
IRL, I, NL, 
P,UK 
B, D, DK, 
GR F, IRL, I, 
NL, 
B, D, DK, 
GR, F, IRL, 
LNL.UK 
D, DK, E, F, 
IRL,NL,P 
D, DK, IRL, 
LNL 
DK, E, IRL, 
LP 
D, DK, E, F, 
I.L.UK NO 
D, GR,, I 
GR,P 
DK, D, GR, 
IRL 
L 
E, L, P, UK 
E,L,P 
B, GR, L L, 
UK 
B, GR, E, F, 
L,P,UK 
B, D, GR, F, 
L,NL,UK 
B,NL DETAIL (References see note 2) 
DK VAT and other taxes 
E: see note point 1 
I: complete registry records 
P: see table 6 
B: computerised treatment of paper returns 
E: see note point 2 
IRL: Simplified bi-monthly return & annual trading details 
L: except calculation of amount due; study underway 
P: see table 6 
DKJ use of branch code such as NACE standard 
D: see note point 1 
E: Identifying labels are sent to taxable persons 
D: see note point 2 
E: see note point 4 
D: see note point 3 
E: see note point 4 
L: accounts checked by Central Payments Office 
D: see note point 4 
E: see note point 5 
I: do not send reminders, but impose penalties 
DK: data-based division into categories prior to establishment of control 
priority 
D: see note point 5 
E: see note point 6 
I: partly 
L: study underway 
UK: but some manual processing is involved 
D: see note point 6 
E: control by Inspection 
F: preliminary formal control 
I: but automated for tax purposes 
L: study underway 
D: see note point 7 
E: see note point 8 
I: by the VAT Offices. For debts recently enforced on a tax list by the agents 
L: study underway 
DK: automatic print-out of control memo (report containing all registered 
information for each firm) 
D: see note point 8 
L: study underway (ESKORT project) 
NL: special programmes for particular target groups 
DK: ESKORT 
D: see note point 9 
L in preparation 
L: study underway (ESKORT project) 
NL: ESKORT system 
UK: a PC based application, "VATPACE" has however been designed to help 
control officers in their visits 
DK: integrated administration of all taxes 
D: see note point 10 
NL: being developed 
P: using VIES 
DK: computer audit of accounts 
E: see note point 9 
F: software for selection and assistance to the desk audit 
L: statistics extracted from central DB2 files in State computing centre usme 
SQL (Structured Query Language) 
UK: various prints are produced by the department's computer system toi 
control purposes 
Source: Member States Response to E.C. Questionnaire 1994 
4, / 
-2-
TABLE 10 
VAT ADMINISTRATION IN MEMBER STATES- EXTENT OF COMPUTERISATION 
Notes 
Notel 
(a) Identification of traders (personal particulars, name of firms), by economic category, etc. 
(b) Printouts of traders on the basis of particulars in the returns, with computerised calculation of the 
tax due. 
(c) Forms which are pre-printed or personalised with pre-printed adhesive labels bearing name, 
address, VAT number and economic sector and sent to traders. 
(d) Entry in the accounts of payments by bank or electronic transfer. 
(e) Identification of persons who have not presented an entry and automatic despatch of a reminder or 
demand. 
Note 2 
DK 
The local edp-bookkeeping systems contains debt and account functions concerning matters that are not 
integrated in nationwide edp-systems. 
D 
(1) In some Lander the basic relevant tax data are sent with returns on a separate sheet. 
(2) For a long time bank transfers have been handled "electronically" in cases involving the return of 
automatically generated (machine-readable) transfer orders sent to taxpayers by the authorities 
containing full details of the purpose, amount and tax number. These orders are then read by 
.machine in an authorised bank, the amounts are credited to the tax cash office's bank account and 
the data are sent to the tax office on a storage medium. The payment data are then entered direct in 
the cash office's accounts. 
More recently all other bank transfers are increasingly being sent "electronically" on storage media 
by the banks, so that the effort previously involved in entering data is now largely unnecessary. 
(3) The banks give no details of the checks applied for VAT purposes (§ 30a of the Tax Code, 
"Protection of bank customers"). 
(4) Under the automated procedure for processing provisional returns and advance payments (UW 
procedure) this is done through monthly checks on provisional VAT returns and under the 
automated tax monitoring procedure for annual returns. 
(5) Under the UW procedure and the automated procedure for calculating/assessing annual VAT 
(USt procedure), returns showing a tax credit undergo arithmetical plausibility checks and 
plausibility checks against data from earlier returns and from the basic data service (e.g. economic 
sector number). 
The automated tax collection and basic data service procedures involve machine checks on refunds 
to show up or prevent fraud. The procedure is in operation in ten Lander and will be introduced in 
the others by 1995. 
(6) Automated plausibility checks under the UW and USt procedures. 
(7) Penalties and associated costs fixed under the penalty procedure for minor offences are credited to 
the computerised accounts. Receipt of payment is monitored by computer and reminders, final 
demands and notices of arrears are issued automatically. 
(8) Control information, no computerisation. 
(9) Pilot application currently under development. 
(10) In some Lander information on business relationships is stored or reference tax number for 
another establishment is filed. However, this does not amount to computerised co-operation with 
other tax authorities. 
ù-
(1) The registration returns submitted by taxable persons are processed. The returns can be for 
inclusion, removal or amendment One of the items of information provided by the system is the 
register of taxable persons who have the obligation to submit periodic VAT returns-assessments, 
which makes it possible to investigate those who fail to comply with the said obligation. 
(2) The returns-assessments submitted by large firms (monthly returns) and taxable persons entered in 
the Register of exporters and intra-community traders (system of monthly refunds) are processed 
for accounting and tax purposes. 
The quarterly returns-assessments submitted by the remaining tax-payers with periodical 
obligations are processed solely for accounting purposes. 
Also processed for tax purposes are the summary returns of an informative character which are 
submitted annually by the periodic declarants of the tax together with the return-assessment of the 
last assessment period of the year. 
(3) There are no pre-printed or personalised forms. However, identifying labels are sent to taxable 
persons who must use them on the forms they submit to the Tax Administration. 
Different return forms are available depending on the type of tax-payer. 
(4) With regard to the list of payments of the tax by bank or electronic transfer and the checks on bank 
revenue in the Treasury or Central Bank, see answer to question 18 of the questionnaire which 
explains the role of the institutions of the Spanish banking system as associated institutions in the 
collection process of the Public Finance Department. 
(5) See previous note relating to point (1). Not all those failing to comply with the obligation to submit 
returns-assessments are investigated, for operational reasons. 
(6) The regularity of returns-assessments submitted by tax-payers requesting monthly refunds who are 
entered in the Register of exporters and intra-community traders is checked by computer. 
The remaining tax-payers request refunds for the balances in their favour annually. The said 
returns are processed by computer with the annual summary returns for checking purposes. 
(7) There is no specific data-processing application for control of input VAT credits. In Spain 
businesses and self-employed persons are required to submit an annual informative return of their 
third-party transactions, both customers and suppliers (Its operation is very similar to the 
recapitulative statement of intra-community transactions). The data processing of this informative 
return of third-party transactions makes it possible to some extent to check on the transactions 
declared by traders in their returns-assessments, comparing these with the allocations made by 
their customers and suppliers in their informative returns. 
(8) There is no specific computer check on payments corresponding to fines, since-in the 
administration assessments and in the inspection certificates no distinction is made for the 
treatment given to fines in relation to tax debt. 
(9) Other uses. 
See point (7) relating to the informative return of transactions with third parties. 
Other specific applications are: 
- INFORMA Program: computerised system for inquiries about the implementation of 
legislation for use by the decentralised services. 
- Electronic mail: system for inquiries about applicable procedures. 
- Computerised VAT course run by the School of Public Finance for its Distance Learning 
Service. 
TABLE 11 
MEMBER STATES VAT CONTROL - ANALYSIS OF THE RANGE OF CONTROL PROCEDURES USED BY MEMBER STATE 
ADMINISTRATIONS IN CONTROL EXERCISES 
[ >: \,;i; or CONTROL 
Control of 
returns 
(preliminary 
cheeks) 
Subsequent/ 
Desk controls 
VAT inspection 
- on the spot 
(full, partial, 
cyclical) ^ELECTION OF POSSIBLE CONTROL PROCEDURES AVAILABLE 
- check listings of returns to registered data 
- check on arithmetic accuracy of returns 
- matching check between payments and returns 
- use of pre-set parameters to check for low payment /high 
refund returns for subsequent control 
- use of more developed risk analysis parameters 
- others - please specify especially for taxable persons 
performing intra-community transactions 
- check comparison with previous returns - credibility 
- review of previous control reports on trader 
- comparison with payment / receipt profiles of traders of 
similar size and/or class of trader 
- request for supporting documentation from trader 
- accounting / statistical checks on documentation received 
- contacts with : other tax or customs departments 
suppliers 
- review of trade journals etc. 
- others - please specify 
- preparation of background / briefing notes 
- preparation of an audit plan for each trader control : 
- timetable 
- areas to be examined 
- audit programme set up 
- sampling and testing of transactions 
- review of systems and compliance testing 
- interrogation of trader computers : electronic tills etc. TAXABLE PERSONS PERFORMING 
DOMESTIC TRANSACTIONS 
YES 
B, DK,D, GR, E, F, IRL, I, L 
B, DK D, GR, E, F, IRL, I, L, 
P, 
B, DK, D.GR, E, F, IRL, I, L, 
P, 
DK, GR, E, F, IRL, I, L 
I, UK 
I, L 
B, DK.D, GR, E, F, IRL, L L, 
P.UK 
B, DK, GR, E, F, IRL, I, L, P, 
UK 
B, DK, GR, E, F, IRL, UK 
B, DK, GR, E, F, IRL, I, L, P, 
UK 
B, DK, GR, F, IRL, I, L, P, 
UK 
B, DK, GR, F, IRL, I, L, P,UK 
B, DK ,E, F, L, UK 
F.I 
DK, D, GR, E, IRL, I, L, 
P,UK 
IRL, P, UK 
B, DK, D, GR, E, F, IRL 
DK, D, GR.-E, F, IRL, L,, P, 
B, DK, D, GR, F, IRL, P, 
B, DK, D, GR, E, F, IRL, L, 
P,UK 
B, DK, D, GR, E, F 
IRL,L,UK, 
B, DK, D, GR, E, F, IRL, P, 
UK NO 
B 
B, GR, 
E,F 
I, L, P, 
p 
B 
I 
L,P, 
B 
L 
P, 
L TAXABLE PERSONS PERFORMING INTRA­
COMMUNITY TRANSACTIONS 
YES 
B, DK,D, GR, E, F, IRL, I, L 
B, DK,D, GR, E, F, IRL, I, P, 
B, DK,D, GR, E, F, IRL, I, P, 
DK, GR, E, F, IRL, I 
I, UK 
F, I, P, 
B, DK.D, GR, E, F, IRL, I L, 
P.UK 
B, DK, GR, E, F, IRL, I, L, P, 
UK 
B, DK, GR, E, F, IRL, UK 
B, DK, GR, E, F, IRL, I, L, P, 
UK 
B, DK, GR, F, IRL, I, L, P, UK 
B, DK, GR, F, IRL, I, L, P, UK 
B ,E, F, L, UK 
F, I 
D, GR, E, IRL, I, L, P, UK 
IRL, P, UK 
B, DK, D, GR, E, F, IRL 
DK, D, GR, E, F, IRL, L,, P, 
B, DK, D GR, F, IRL, P, 
B, DK, D, GR, E, F, IRL, L, P, 
UK 
B, DK, D, GR, E, F, IRL, L 
UK 
B, DK, D, GR, E, F, IRL, P, 
UK NO 
B 
B,GR,E, 
F 
I,L,P, 
P. 
B 
I 
L.P. 
B 
P, 
L DETAIL 
F: search for defaulters 
IRL: high refund only 
L: 1st refund, refund for standard sector 
B: specific listing of intracommunity deliveries and 
acquisitions 
IRL: repayement side only 
F: control of certain specific lines 
UK: specific analysis trade class 
I: art. 21 of Decree on control programme 
F: reference ratios to the exclusion of accounting documents 
F: study of margin, equivalence direct taxes/VAT 
Lmatching checks,bank investigations, in the case of general 
checks 
F: case-studies, data sheets 
D: sector specific knowhow, statistic, control 
communications 
I: see art. 5, 51, 52, 12 of Decree on control programme 
UK: for large traders 
B: except I.S.I. 
D: for large traders all exercises examined 
1 
F: data processing used 
D: cyclical, exam for years before 
\!otc 
)K: Source: Member States Response to E.C. Questionnaire 1994 
The answer in the paragraph of VAT-inspection-areas to be examined should be both "yes" and "no". ^ 
TABLE 12 
MEMBER STATES VAT CONTROL - ANALYSIS OF THE RANGE OF CONTROL PROCEDURES USED BY MEMBER STATE 
ADMINISTRATIONS IN CONTROL EXERCISES 
STAGE OF 
CONTROL 
VAT inspection - on 
the spot 
(full, partial, 
cyclical) 
continued SELECTION OF POSSIBLE CONTROL 
PROCEDURES AVAILABLE 
- stock checks 
- confirmation of cash/bank balances 
- simultaneous controls at local branches of large 
companies 
- contacts with - other tax or customs departments 
- suppliers 
- other (please specify) third 
parties 
- contacts with other Member States 
- administrative co-operation requests 
under Regulation 218/92 
- mutual assistance requests Directive 
77/799 
- simultaneous audit of multinational 
trader 
- other controls - please specify TAXABLE PERSONS PERFORMING 
DOMESTIC TRANSACTIONS 
YES 
B DK, D, E, GR, F, 
IRL, I, L, P, UK 
DK, D, E, GR, F, 
IRL,I,L,UK 
DK, D, E, GR, F, 
IRL, I, P, UK 
B DK, D, E, F, IRL, I, 
L, P,UK 
DK,D, E, F, IRL, I, 
L,NL,P 
DK, D, E,, F, IRL, L, 
P.UK 
DKF,IRL,P,UK 
B DK E, F, IRL, I, L, 
NL,P 
B DK E, F, IRL, I, L, 
P.UK 
B DK, E, GR, F, IRL, 
I,L,P,UK 
DKF,IRL,I,L,UK NO 
B 
B,L 
B 
B 
UK 
NL TAXABLE PERSONS 
PERFORMING 
INTRACOMMUNITY 
TRANSACTIONS 
YES 
B DK, D, E, GR, F, IRL, I, 
UP, UK 
DK, D, E, GR, F, IRL, I, L, 
UK 
DK, D, E, GR, F, IRL, I, L, 
P.UK 
B, DK, D, E, GR, F, IRL, I, 
L,P,UK 
DK , D, E, , F, IRL, I, L, 
NL,P 
DK,D, E,,F,IRL,L,P 
DKIRL,P,UK 
B DK E, , F, IRL, I, L.NL, 
P,UK 
B DK E,, F, IRL, I, L, P, UK 
B DK, E, GR, F, IRL, I, L, 
P.UK 
DK F, IRL, I, UK DETAIL 
NO 
B 
B,L 
B 
B 
NL 
L, GR: Regular 
I: for general checks 
NL: May be included in check 
B: if necessary 
D: cyclical 
I: for general checks 
NL: May be included in check 
B: I.S.I, excepted 
I: for general checks 
NL:Possible if deemed appropriate 
D: with Customs 
F:Research departments 
I: for general checks 
L: Direct Taxes, Customs, private 
individual, Gendarmerie 
B:if necessary,: 
D: in case of doubt 
B: if necessary 
DK: bank,auditor,local tax authorities, 
D: in case of doubt: 
F: Other authorities 
I: when necessary 
UK using the "Vies system direct to local 
offices 
Lwhen necessary 
UK if necessary 
Lwhen necessary 
UK experimental stages only 
B:physical control 
DK: ESKORT, computer audit; 
F: Reconstruction of receipts 
Lwhen necessary 
L: checks on wealth 
UK: Invigilation/observation visits, 
unannounced visits for intra-community 
traders 
Source: Member States Response to E.C. Questionnaire 1994 
TABLE 13 
MEMBER STATES VAT CONTROL - AVERAGE DURATION OF CONTROL 
vi'N I-ROLTYP1-
Control of returns 
(preliminary checks) 
Desk control 
Full general control 
Partial / cyclical control 
Special control of companies 
undertaking intracommunity 
trade company 
size 
small 
medium 
large 
small 
medium 
large 
small 
medium 
large 
small 
medium 
large AVERAGE DURATION 
B 
Id 
4d 
8d 
1/2 d 
+ W DK 
see 
note 
(1) 
see 
note 
see 
note 
see 
note 
see 
note D 
see 
note 
(2) 
see 
note 
see 
note 
see 
note 
see 
note GR 
ID 
+ D 
+ W 
1 w 
+ w E 
+ D 
1W 
+ W 
ID 
+ D 
+ D 
1 W 
+ W F 
ID 
1 D / 
+ D 
+ D / 
+ W 
+ D 
+ D IRL 
on­
going 
ID 
ID 
+ D 
ID 
+ D 
+ W 
ID 
+ D 
+ D 
ID 
ID 
ID I 
ID 
ID 
1 W 
+ D 
ID 
+ D 
+ D L 
1/4 
1/3 
1+D 
ID 
+ D 
1 W 
+ D 
+ W 
+ W 
ID 
+ D 
1 W 
ID 
+ D 
1 W NL 
see 
note 
(3) P 
not 
avai­
lable 
not 
avai­
lable 
not 
avai­
lable 
not 
avai­
lable 
not 
avai­
lable UK 
see 
note 
(4) 
none 
)+D 
)+D 
see 
note 
Source: Member States Response to E.C. Questionnaire 1994 
KEY AVERAGE DURATION 
1 D = one day 
+ D = several days 
1 W = one week 
+ W = several weeks 
Permanent Control 
Notes 
DK (1 ) : the use of resources and planning of controls have been delegated to the regional offices. The central administration does not keep statistics on the length of individual control visit and the resources used. 
D (2): The Federal Ministry of Finance has no information on duration. As a general guide, however, inspectors are expected to cover annually: 9-12 large firms, 20 - 25 medium firms, 40 - 50 small firms. 
In the case of groups and other major companies inspections may extend over several years including all exercices not yet examined. Number of inspectors taking part (1992): 8 636. It's not possible to give a 
breakdown of inspectors by large, medium and small firms. 
Special VAT inspections 
Duration of inspections. Each specialised VAT inspector carries out an average of some 76 inspections per year (1992). 
Number of inspectors taking part (1992): 1048. It is not possible to give a breakdown of inspectors by large, medium and small firms. 
NL (3): The inspections of the 200 largest companies in the Netherlands take over a week on average. They are conducted by several people, including specialist in the case of other undertakings the control takes 
a day or more and is usually carried out by a single officer. These figures apply to both full and partial inspections. Cheks on firms involved in intra-Commumty transactions are as far as possible incorporated in 
the normal control programme. 
UK (4): No specialised control. Control is carried out as a part of the normal control function 
TABLE 14 
MEMBER STATES VAT CONTROL - NUMBER OF INSPECTORS TAKING PART IN CONTROLS 
CONTROL TYPE 
Control of returns 
(preliminary checks) 
Desk control ' 
Full general control 
Partial / cyclical control 
Special control of companies 
undertaking intracommunity 
trade company 
size 
small 
medium 
large 
small 
medium 
large 
small 
medium 
large 
small 
medium 
large NUMBER OF INSPECTORS 
B 
1 
1 
1 
1 
2 
1 
1 DK 
see 
note 
(1) 
see 
note 
see 
note 
see 
note 
see 
note D 
see 
note 
(2) 
see 
note 
see 
note 
see 
note 
see 
note GR 
1 
lor 2 
lor 2 
lor 2 
lor 2 E 
1 
2 
3 F 
1 
1 
1 
1 
1 IRL 
see 
note 
(3) 
1 
1 
1 
1 
2 
3 
1 
2 
3 
1 
1 
1 I 
ID 
ID 
1 W 
+ D 
ID 
+ D 
+ D L 
1 
1 
2 
1 
1 NL 
see 
note 
W P 
not 
avai­
lable 
not 
avai­
lable 
not 
avai­
lable 
not 
avai­
lable 
not 
avai­
lable UK 
not applicable 
not applicable 
3 
1 
As above for 
normal control 
function 
Source: Member States Response to E.C. Questionnaire 1994 
KEY 
NUMBER OF INSPECTORS 
1 = one inspector 
2 = up to two inspectors 
3 = up to three inspectors 
3+ = more than three inspectors 
Notes 
(1) DK: 
(2) D: 
(3) IRL: 
(4) NL: the use of resources and planning of controls have been delegated to the regional offices. 
the central administration does not keep statistics on the length of individual control visit and the resources used. 
see table 7; a split as to size of controlled entities is not possible 
by Collector General's Office 
see table 13 
o. 
TABLE 15 
MEMBER STATES VAT CONTROL - IMPROVING TAXABLE PERSONS RIGHTS AND ACCESS TO INFORMATION 
PROCEDURE 
1 Are taxable persons advised in advance of the 
i) date 
ii) length of the control? 
2. If the administration is undertaking a partial or cyclical 
control is the chosen subject or area for examination advised 
to the trader 
i) in advance? 
ii) at the start of the control? 
3. Are control findings discussed with the trader prior to 
the preparation of the control report? 
4. Are control conclusions discussed with the trader after 
completion of the control report? 
5. Once completed can the 'agreed' conclusions of a report 
be changed 
i) by the administration on reflection? 
ii) by re-examination of the controlled documents? 
ii) by appeal from the trader on reflection? 
6. Are written warnings used to deter taxable persons from 
future non-compliance? YES 
B, DK, D, GR, E, F, 
IRL, L, NL, P, UK 
D, UK 
DK, D, E, F, NL 
DK, GR, E, IRL, I, P 
DK, D, GR, E, F, IRL, 
I, L, NL, UK 
DK, D, F, IRL, I 
B, DK, D, GR, E, F, 
IRL, I, L, ,UK 
B, DK, D, GR, E, F, 
ERL, I, L,,UK 
B, DK', D, GR, E, F, 
IRL, I, L, UK 
B, DK, GR, E, F, NL, 
UK NO 
B, F, LRL, 
I, L, NL, 
P 
I 
B, IRL, L, 
I, P,UK 
B, F, L, 
UK 
B, P 
B, DK, 
GR, E, L, 
NL,P 
P 
P 
P 
D,LL,P COMMENT 
B: only for full controls 
D: obligatory 
GR: The large companies one day before (belonging to Category C) 
E: 10 days 
F:the length is variable 
ERL: dependant on co-operation 
L: no, if fraud is suspected 
UK: in certain circumstances (eg suspicion of suppression) notice may 
not be given 
IRL: trader normally notified of period to be examined 
B:if the occasion arises; the view of the taxable person is taken into 
account in the control report 
F: in an oral discussion between the parties before communication of 
the adjustments 
B: if the occasion arises; the view of the taxable person is taken into 
account in the control report 
D: in case of trader's disagreement with conclusions 
F: possibility to present written observations 
I: the trader may make counterstatements which are recorded in the 
report 
GR.Only after an objection to the Public Finance Department in the 
taxation courts 
F:modification of the tax base or sustitution of legal base, only under 
certain conditions 
ERL: (i) formal review procedure 
I: principle of self - defence 
L: if new facts come to light 
NL: a trader has 14 days to react after receiving the control report. The 
tax authorities may revise the conclusions cf. new facts emerge. 
B: yes for exemple if a declaration is not submitted 
L: yes from 1995 
F: demand for payment 
Source: Member States Response to E.C. Questionnaire 1994 
£r-
TABLE IS 
MEMBER STATES VAT CONTROL - IMPROVING TAXABLE PERSONS RIGHTS AND ACCESS TO INFORMATION 
7. Are traders advised in advance of the likely imposition of 
a severe penalty and given an opportunity to present their 
case? 
8. Has the taxpayer the right to appeal on 
i) the conduct of the control? 
ii) the conclusions 
9. Once the control is completed, is there a minimum time 
period that must elapse before which the taxpayer can be 
controlled again? 
10. Are taxable persons advised of the above (1-9) 
procedures, perhaps using a charter, or other method? 
(please specify) 
11. Are there any other procedures that your administration 
uses as to improve taxable persons rights and their access to 
information? - details please B, DK, GR, E, F, ERL, 
L, NL, UK 
B, DK, D, E, F, IRL, I, 
L,NL, UK 
B, DK, D, GR, E, F, 
IRL, I, L, NL, P, UK 
D, GR, E, F, P, UK 
B, DK, F, ERL ,P, UK E,I,P 
P 
B, DK, D, 
GR, E, F, 
IRL, I, L, 
NL, UK 
B, DK, 
ERL,I,L 
GR,I, L B: informed by written warnings sent to them. This also allows the 
taxable person to be able to defend himself. 
GR When the penalty has been imposed it is discussed. With the head 
of the Public Finance Department 
D: always right to be consulted 
IRL: option of voluntary disclosure prior to commencement of the 
audit 
DK: To Customs and Tax Administration, VAT board or the courts. 
IRL: (i) formal review procedure/ (ii) see attached note 
L: after tax bill has been sent 
B: physical controls or controls on refunds can always take place. 
D: yes, but note obligation to avoid overcharge of the taxpayer. 
GR:It may be controlled next time by the department of control or by 
extraordinary control teams. 
B: they are not specifically advised; they can be by publications 
GR: In summary form 
F:taxpayer's charter 
B: press notices, circulars, preparation of explanatory notes,all new 
taxable persons receive an explanatory file for taxpayers, possibility to 
have classes provided by the administration 
F: departmental contact person, independent mediating bodies 
ERL: "Charter of Rights" is available to all taxable persons (copy 
attached) 
I: 1) setting up of taxpayers information office 
2) law 241/90, chapter V. and the regulation on transparency in 
public administration 
UK: traders rights are published in a variety of leaflets 
Source: Member States Response to E.C. Questionnaire 1994 
-2 ^ 
h°, 
TABLE 15 
MEMBER STATES VAT CONTROL - IMPROVING TAXABLE PERSONS RIGHTS AND ACCESS TO 
INFORMATION 
Notes 
DK 
1. Firms are advised of the control either in writing or by telephone. The control is not announced if considerable 
irregularities are suspected or if there is special control information. 
The duration of the visit is estimated at the start of the control when the auditor has gained a full picture of the 
quality of the accounts, etc. 
2. The firm is normally advised which annual accounts or accounting documents the auditor wishes to have at his 
disposal during the control visit. Depending on the situation, the auditor may wait until the start of the control to 
provide the firm with more detailed information. 
3. The firm is advised of any demands for payment, repayments or infringements of the relevant legislation at the end 
of the control. 
4. Control conclusions are always discussed with the traders if the result is an infiingemenL If the control shows that 
books are all right, the trader is just informed about the result without any discussions. 
5. The results or conclusions may be altered if the firm objects; the case may be reopened if the firm can produce any 
missing documents or wishes to provide new information on a specific matter. 
The firm may appeal to the regional customs and tax office and, if this appeal is rejected, to the administration. In 
a number of cases the firm may submit its case to the VAT Board which will take the administrative decision. 
Finally, the firm may take the case to court 
7. The firms/traders explanation is contained in a report. Afterwards the firms/traders may provide written 
information/objections to get conclusions and penalties changed. 
10. Taxpayers are informed/advised during the control visit- but not in advance. 
11. When a firm registers, it is sent a guideline on the rights and obligations applying both to it and to the control 
authorities. 
Whenever there is any new legislation or changes to existing legislation, guidelines containing the new rules are 
issued. 
Virtually all regional offices have an information department where firms may obtain information about legislation. 
Firms are invited to information meetings at the regional offices when legislation, etc., is amended. 
Newly-registered firms can attend information meetings. If the firm wishes, a trial control visit may be conducted 
on its premises. 
IRL 
An appeals procedure whereby the Appeal Commissioners, who are independent of the tax authority are empowered to 
adjudicate in disputes between the tax authority and the taxpayer. 
The taxpayer may appeal against estimates of tax due made against him, against a decision that-he is a taxable person, 
against a decision on the rate of tax applicable to particular goods or services, and against a refusal of or reduction in 
repayment of tax. 
Decisions of the Appeal Commissioners may be appealed to the ordinary judicial courts by either the tax authority or the 
taxpayer. 
The procedure for bringing disputes to the Appeal Commissioners is utilised effectively. Further appeals to the judicial 
courts are less frequent. 
Although there is no statutory right to do so, the taxpayer may ask for an extension of time to pay arrears of tax. The tax 
authority may, at its discretion, allow an extension. 
When an appeal has been submitted to the Appeal Commissioners the tax involved is not payable until the appeal is 
determined. Where an estimate is confirmed by the Appeal Commissioners, the tax must be paid before a further appeal 
may proceed to the judicial courts. 
The administration cannot prevent an appeal being brought where they suspect that the primary purpose of that appeal is 
to defer payment. 
P 
Procedure 1: In accordance with Article 75(3) of the tax procedure code, the order for the examination of documents to 
be carried out is communicated to the taxable person in advance. 
Procedure 2: In accordance with Article 75(3) of the tax procedure code, the departmental schedule determines the area 
and scope of the examination of documents. 
Procedures 3 and 4: Control conclusions are not discussed with traders. However, in accordance with Articles 4 and 5 of 
the tax procedure code, within 30 days of the completion of the examination of the documents, a report must be drawn 
up with a brief explanation of where the taxable person may not be in compliance with the law. Taxable persons are 
notified of the conclusions of the report within 8 days. 
-3 
,D 
Procedure 5: This type of procedure does not exist in Portugal. 
Procedure 8(ii): Taxable persons may appeal on the conclusions of the control either administratively or through the 
courts. Article 90 of the tax Code, inserted in the chapter on taxpayers' guarantees, states that taxable persons and 
persons who are jointly and severally liable for payment of the tax may appeal against the tax assessment or contest it on 
the grounds and terms laid down in the tax procedure code. 
As a rule, appeals do not have suspensory effect However, where the tax was calculated on the basis of estimates owing 
to the non-availability of the data needed to assess the tax properly, there is a compulsory assessment procedure which is 
suspensory and is laid down in Article 84 of the tax Code. 
In addition to this procedure, in accordance with Article 84 of the tax procedure code taxable persons may appeal to the 
review committee against the decision establishing the taxable base on the grounds that it was incorrectly calculated as a 
result of indicator-based methods. Such appeals also have suspensory effect. This procedure is outside the structure of the 
departments. 
The guarantees contained in the tax administration procedures include administrative claims as governed by Article 95 
ff. of the tax procedure code. These claims are also eligible for appeals through the official channels in accordance with 
Article 100(1) of the tax procedure code, the appeals being governed by Article 91 ff. of the same code. 
Appeals procedures are excluded only in the case of decisions of the revision committees referred to in Article 84(1) of 
the tax procedure code on appeals against the calculation of the taxable base using indicator-based methods. 
Claims for refund of tax governed by Article 120 ff. are provided for in judicial procedures on taxation which are 
intended to provide judicial protection for legally protected rights and interests in respect of tax. The scope of these 
procedures is laid down in Article 118 of the tax procedure code. 
Procedure 9: There is no minimum time period fixed. 
Procedure 10: Taxable persons are informed by official communications of the means of redress at their disposal. 
Procedure 11: Taxable persons' rights are also protected in the following ways: 
Right to information (Article 20 of the tax procedure code) 
The right to information covers, in particular: 
(a) clarification's on interpretation of tax laws and the most convenient and sound means of complying with them; 
(b) information on how taxpayers' requests or appeals are progressing and when they are likely to be finalised; 
(c) binding prior information; 
(d) informing accused persons of the existence, nature and source of malicious unconfirmed accusations against them; 
(e) allowing taxpayers or their representatives access to individual files properly organised and kept by the tax 
authorities. 
The right to explanation (Article 21 of the tax procedure code): 
(a) decisions on tax matters affecting the legally protected rights or interests of taxable persons must state the factual and 
legal grounds on which they were reached; 
(b) Taxable persons Are entitled to an explanatory statement accompanying decisions. 
In addition, whenever amendments are made by the VAT administration departments, information leaflets for taxpayers 
are produced containing the necessary instructions on how to comply with the legislative changes or new procedural 
rules sent along with the periodic returns to all taxable persons under the normal arrangements. 
-4 
TABLE 16 
MEMBER STATES VAT CONTROL STATISTICS FOR THE YEARS 1992 AND 1993 
CATEGORY OF 
INFORMATION 
a) The total number of 
registered taxable persons 
analysed by periodicity of 
their returns as follows : 1992 
1993 
i) monthly 1992 
1993 
ii) quarterly 1992 
1993 
iii) annual 1992 
1993 
iv) other 1992 
1993 
b) Number of controls 
undertaken involving visit to 
trader 1992 
1993 
c) Number of desk controls 
undertaken not involving visit 
to trader 1992 
1993 
d) Number of taxable 
persons who failed to make a 
return 1992 
1993 NUMBER OF TAXABLE PERSONS / OR CONTROLS ON TAXABLE PERSONS 
B 
643.412 
658.717 
76.629 
76.952 
411.359 
458.068 
64520 
90.904 
123697 
82731 
81410 
(1) 
(1) 
(2) 
(2) DK 
404.000 
404 941 
7000 
7071 
290.000 
290.675 
104 000 
104.618" 
33.000 
27.000 
included in b) 
included in b) 
20 000 
20.365 D 
1988:2.021.824 
1990:2.103.974 
1988 1.357.263 
1990:1.449.508 
1988:664.561 
1990: 645.466 
79.407 
82.752 
not available 
not available GR 
750 000 
820.000 
60.000 
70.000 
130 000 
150 000 
560 000 
600 000 
(bimonthly) 
30 000 
30 000 E 
ca 2100000 
26911 
23 373 F 
2.506.699 
2.527.939 
1 248 307 
1.249.826 
1.209.988 
1.121.977 
30.055 
29.877 
18.349 
126.259 
38.858 
39.413 
450.0000 IRL 
126.754 
133.117 
1.199 
1.066 
nil 
32.112 
35.296 
93.443 
96.755 
19.373 
13.158 
not available 
not available I 
ca 5.200.000 
ca 5.200.000 
5.200.000 
5.200.000 
44.332 
46.185 
142.070 
148.426 
50.000 
not available L 
23.148 
25.261 
3298 
3221 
16.034 
16.492 
3.816 
5.548 
243 
130 
1.350 
1.200 
3.000 
3.000 NL 
593.188 
637.069 
192687 
206853 
350.109 
380.713 
- 50.392 
49.503 
none 
none 
65.000 
66.000 
534.000 
470.000 
not available P 
503.868 
569.604 
83060 
88143 
420.808 
481.461 
a) 34.517 
a) 36.609 
b) 12.795 
b) 47.188 
8.945 
b) 40.850 
97.000 
106.000 UK 
1.555.527 
1.593.770 
426.000 
378.000 
not applicable 
not applicable 
Source: Member States Responses to E.C. Questionnaire 1994 
TABLE 16 
MEMBER STATES VAT CONTROL STATISTICS FOR THE YEARS 1992 AND 1993 
CATEGORY OF 
INFORMATION 
e) Number of adjustments made 
to taxable persons' returns 
following your 
administrations checks and 
controls 1992 
1993 
f) Number of trader appeals going 
to independent administrative 
arbitration / court 1992 
1993 NUMBER OF TAXABLE PERSONS / OR CONTROLS ON TAXABLE PERSONS 
B 
194.383 
200.255 
100(3)/961(4) 
174(3)/915(4) DK 
20 000 
not 
determined 
statistically D 
not available 
for VAT alone GR 
15 000 
approx 
12 000 E 
31 838 
28 942 F 
129.942 
127.628 
4.848 
2.997 IRL 
not available I 
291.475 
370.682 L 
6.527 
7.581 
13 
7 NL 
494.000 
591.000 
468 
401 P UK 
266.000 
2463 
Notes 
( 1 ) A control is legal if there is not a change in the principal point for the control of the taxable person, 
except: controls on the value of buildings (22.468 in 1992 and 22.353 in 1993) 
(2) In Belgium, the administration has two ways of dealing with this problem: 
- a control that allows the reconstruction of the contents of the declaration 
- automatic taxation on the basis of previous declarations. 
(3) Number of cases remaining open at 31st December 1992 and 1993 comprising cases not yet resolved in previous years. 
(4) Number of cases recorded in 1992 and 1993. 
Source: Member States Responses to E.C. Questionnaire 1994 
TABLE 17 
MEMBER STATES VAT CONTROL STATISTICS FOR THE YEARS 1992 AND 1993 
CATEGORY OF 
INFORMATION 
i) monthly 1992 
1993 
ii) quarterly 1992 
1993 
iii) annual 1992 
1993 
iv) other 1992 
1993 
Total 
1992 
1993 NUMBER OF RETURNS RECEIVED 
B (1) 
919.548 
923.424 
1.645.436 
1.832.272 
64.520 
0 
(1)90.904 
(1) 123.697 
2.720.408 
2.879.393 DK 
84.000 
84.000 
1.082.000 
1.082.000 
259.000 
259.864 
1.425.000 
1.425.864 D (1) 
1988:16.287.156 
1990:17.394.096 
1988:2.658.244 
1990:2.581.864 
1988:18.945.400 
1990:19.975.960 GR (1) 
720.000 
840.000 
520.000 
600.000 
3.360.000 
3.600.000 
4.600.000 
5.040.000 E 
(2)' 
ca 9.500.000 F (1) 
14.979.684 
4.839.952 
30.055 
15.009.739 IRL 
not available 
not available 
nil 
nil 
13.913 
16.106 
386.726 
382.843 
400.639 
398.949 I 
5.200.000 
5.200.000 
5.200.000 
5.200.000 L 
23.398 
23.503 
26.089 
27.024 
3.816 
5.548 
53.303 
56.075 NL 
2.312.244 
2.842.336 
1.400.436 
1.522.852 
50.392 
49.503 
none 
none 
3.763.072 
4.414.691 P 
886.020 
931.622 
1.415.406 
1.557.516 
2.301.426 
2.489.138 UK 
7.129.400 
6.938.900 
Source: Member States Responses to E.C. Questionnaire 1994 
Notes 
(1) Estimate number of taxable persons registered for monthly, quarterly returns etc. (x 12, or 3 as appropriate) 
(2) Source: First VAT Report 
Ls-
TABLE 18 
MEMBER STATES VAT CONTROL STATISTICS FOR THE YEARS 1992 - 1993 
CATEGORY OF 
INFORMATION 
a) Value of adjustments made to 
taxable persons' returns 
following your administrations 
checks and controls 
1992 
1993 ACTUAL FINANCIAL AMOUNT (IN MIO NATIONAL CURRENCY) 
B 
20.171,4 
19.097,7 DK D 
2.027..8 
2.304..6 GR E 
34.873 
30.942,1 F 
12.443 
13473 IRL 
not available 
not available I 
1.594.(*) 
1.757(*) L 
421..6 
400,1 NL 
281 
436 P 
28,9 
31,6 UK 
1464 under 
500 over 
964 net 
1641 under 
665 over 
976 net 
Source: Member States Responses to E.C. Questionnaire 1994 
(*) I: in billions of Lire 
^V 
p 
Annex 1 
Checks on registration and VAT identification number ' 
1. Entitlement to register: 
2. Failure to register: 
Entitlement to keep an 
attributed VAT identification 
number: All Member States check based on 
declaration filed 
- cross-check with other tax data: 
F,I,NL 
- information obtained from other 
government departments, e.g. 
commercial court register, 
trading lists: B, D, F, L 
- active investigation and 
controls: B, F, NL, P, UK, IRL, 
DK 
- information received from other 
traders, e.g. by control visits: B, 
D, E, NL, UK, DK 
- examination of professional 
association publications: L 
- press advertisements: D, L, NL, 
UK 
- no checks: D 
- check, if no returns, repeated nil 
returns: B, GR, E, IRL, L, UK 
- control visits: B, UK 
Source: Member States Responses to E.C. Questionnaire 1994 
Annex 2 
Sanctions in case of invoice without VAT identification number 1 
Provided for in: B, DK, GR, E, IRL, I, L, NL, P 
UK (if repeatedly not mentioned) 
No provision in : D, F (except in fraud cases) 
1 Source: Member States Responses to E.C. Questionnaire 1994 
Annex 3 
Means of checking the volume of supplies effected by non-established taxable persons 1 
- Information exchange between Member States: B, DK, D, GR, E, LRL, NL 
- Control of tax representatives: B, DK 
- Information from third parties: D, F, L, DK 
- Press advertisements: D, F, L 
- Planned: mandatory information obligations for non P 
established taxable persons: 
- Active investigation: D, UK, IRL 
Control of intra-community acquisition of new means of transport by final consumers l 
Tax payment condition for registration or registration B, DK, D, F, LRL, I, L, NL, P, UK 
cross-check: 
Customs controls GR 
Automatic exchange of information: B, DK, LRL, UK 
Means of control of intra-community supplies transported by the buyer l 
1. Check of trade documents (invoices, written orders, B, DK, F, I, L, NL, P 
bank statements etc.): 
2. Active investigation if grounds for suspicion: 
- common interest of persons taking part in the DK, NL 
transaction, e.g. associated enterprises: 
- type and nature of sold goods (e.g. pleasure boats, DK, NL 
camping cars): 
3. For cases where purchaser collected goods: Control of DK 
VAT number: 
4. Exchange of information with other Member States: all Member States 
Source: Member States Responses to E.C. Questionnaire 1994 
-A 
i • 
Annex 4 
Member States experiences in the Application of Council Directive 76/308/EEC 1 
On mutual assistance for the recovery of claims resulting from 
operations forming part of the system of financing the 
European Agricultural Guidance and Guarantee Fund, and of 
agricultural levies and customs duties 2 
1. No problems identified : DK, L, P, UK 
2. Contact and information problems : 
- complicated procedure : D 
- difficulties to contact competent authorities : E, NL 
- language problems, e.g. due to non standardised accompanying documentation : E 
- no reply in certain cases : F 
- lack of regular consultations : NL 
- co-ordination problems if more than 2 MS concerned : NL 
- insufficient supply of information needed to trace debtor : LRL 
- lack of information about time limits for claims recovery : F 
3. Problems due to insufficient harmonisation : 
- unharmonised legislation : GR, I 
- diverging degree of liability : F 
- MS with significant control and enforcement power disadvantaged compared to 
other MS: F 
4. Slow procedure, insufficient outcome : D, F, NL 
- no preference of tax debt in the requested MS : B 
- no possibility of precautionary measures : E 
5. Cost of proceedings : E 
1 Source: Member States Responses to E.C. Questionnaire 1994 
2 Ref. Council Directive 79/1071/EEC of 6 December 1979 amending Directive 76/308 
)o 
ANNEX 5 
THE INTER-NORDIC AGREEMENTS ON GUIDELINES FOR IMPLEMENTING 
SIMULTANEOUS AUDITS 
ANEXAJVIPLE 
The Nordic countries (Denmark, Finland, Norway, Sweden) have prepared guidelines to 
make their work in undertaking simultaneous audits of large companies, who carry out 
their activities in several countries, more efficient. 
A simultaneous audit means an arrangement between two or more parties to examine 
simultaneously and independently, each on its own territory, the tax affairs of taxable 
persons in whom they have a common or related interest, with a view to exchanging any 
relevant information which they might obtain. 
The main purposes of such simultaneous audits are to determine a taxable person's correct 
liability where e.g. costs are shared and profits allocated between taxpayers in different tax 
jurisdictions, or to tackle apparent tax avoidance techniques or in cases of unreported 
income, illegal payments, etc. 
Below the Commission summarises aspects covered by Guidelines for Implementing Inter-
Nordic Simultaneous Audits which themselves refer to the OECD' Model Agreement for 
the undertaking of simultaneous tax examinations l. 
a) Responsibility and Management 
Overall responsibility for simultaneous control lies with the heads of the tax control 
departments of the individual countries. 
A project group, consisting of one member from each country involved, is set up to 
plan and undertake the controls. This group would appoint the country that will be 
responsible for co-ordination. This would normally be the country proposing a 
company for simultaneous audit, or where the company has its main office. The co­
ordinator has a list of responsibilities covering the convening of joint meetings, the 
selection of joint tax control areas, ensuring that general tax control information is 
collected and distributed, monitoring progress and preparing the final analyses, etc. 
b) Selection of companies 
The Nordic agreement does not use objective criteria like risk analysis in the 
selection of companies for control. Rather companies are appointed on the basis of 
their suitability for simultaneous tax control. The choice of tax control subjects could 
OECDC(92)81/Final 
be based on the examples given by the OECD. e.g. if there is an indication of tax 
avoidance and evasion; substantial non-compliance of tax law: if forms of 
international tax planning which if tackled might generate additional tax yield in 
participating states. 
c) Planning of tax control 
Detailed guidelines for the implementation of the control are agreed at a joint 
meeting for each selected company. Prior to this an initial investigation of the 
company is undertaken e.g. of their financial and accounting systems. The selected 
company may be invited to attend the planning meeting. 
d) Co-ordination of tax control procedures 
At the planning meeting tax control areas of mutual interest and conditions of 
assistance alongwith the time schedule for implementation will be determined. The 
discussions will agree the extent to which tax control information should be 
exchanged. This can include agreements that auditors from one country participate in 
investigations in other countries. 
e) Communication between auditors 
To ensure that participating auditors are fully and continuously informed on control 
progression and results information sheets and newsletters, are used. 
f) Consultations 
For participating auditors so as to allow the exchange of experience and to discuss 
further initiatives regular meetings are held. Such meetings are always held before the 
conclusion of an investigation at a firm. 
g) Completion of the case and final report 
A meeting is held to discuss conclusions and to agree on a common attitude by the 
individual countries to the company for the problems found in the areas covered by 
the tax control. The meeting will allow an overall evaluation of the project. The 
progress on all projects are reported to the heads of the tax control departments of 
the Nordic countries on a regular basis. 
ANNEX 6 
THE CYCLE OF CONTROL FOR DIFFERENT TRADER CATEGORIES AND THE DEFINITIONS OF SIZE USED L 
Member State 
Trader 
category 
classification 
Large 
Medium 
Small 
Micro-sized B 
5 years 
5 years 
5 years DK 
} Firms 
} classified 
} by risk and 
} not size 
} 
} 
} 
} 
} 
} 
} 
} 
} D 
4.7. years 
(control of 
all 
exercises -
"Anschluss 
priifung") 
11.5 years 
19.48 years 
57 years E 
5 years 
> 4.000 m. 
pesetas 
not reported 
1.000-4.000 m. 
pesetas 
not reported 
< 1.000 m. 
pesetas 
not reported F 
6-8 years 
> FRF 100 
millions GR 
5 years 
> 180 m. 
dra. 
>180m. 
dra. 
<15m. 
dra. I 
3 yearly 
3 years 
< 20 mecus 
< 250 staff 
3 years 
< 5 mecus 
< 50 staff IRL 
not 
available 
not 
available 
not 
available 
not 
available L 
not 
available 
not 
available 
not 
available 
not 
available NL 
Annually 
6/7 years 
6/7 years P 
not 
available 
not 
available 
not 
available 
not 
available UK 
continuous 
> £ 100 m. 
} by risk 
} Med. - 2.5 -
} 6 years 
} Low 7 
} years + 
over 
} 
} 
} 
} 
} 
} 
The table indicates: i) the frequency of control visits by trader size. ' 
ii) the definition of size 
N.B : some MS (DK) classify traders by risk rather than size and as such do not have a control cycle by trader size. 
Source: Member States Responses to E.C. Questionnaire 1994 
u 
Annex 7 
COMPUTER-GUIDED AUDIT EXPERT SYSTEMS EN MEMBER STATES 
BELGIUM: 
None 
DENMARK: 
ESKORT -an information based specialist assistance system- was introduced in 
1989 for use in VAT controls. Since then the system has been constantly improved 
and extended. 
The system is now used at all stages of controls of VAT, employers and payroll tax 
and on 1st October 1994 will be extended to tax controls and EAGGF controls. 
The system will then contain instruments which can be used to back up all stages of 
the co-ordinated controls. Before a control visit starts, all relevant information 
about firms in the central system will be downloaded to ESKORT. On the bases of 
this information the system will be able to help the user draw up an audit plan. 
GERMANY: 
No expert system is currently in use. Computerised aids for on-the-spot inspections 
mainly take the form of programs developed for this purpose inside the tax 
administration. 
GREECE: 
The administration are examining the feasibility of introducing expert systems in 
Greece, initially for the control of large companies. 
FRANCE: . 
At the end of 1993, the Directorate-General for Taxation made available to its 
departments a software programme called OSIRIS to assist in desk control. It is 
based on the technique of expert systems. 
The application allows: 
- consultation of the direct tax and VAT returns of industrial and commercial 
companies. Automatic data collection is planned. Missing information can be 
collected by the user where necessary; 
- control of the consistency from the accounting point of view of tax files; 
- detailed analysis of the data present in the database on the bases of a group of 62 
possible areas for investigation. Some of these relate more specifically to VAT 
(concordance direct taxes/VAT, study of the assets-side and liabilities-side of the 
balance sheet...); 
- documents to be made available (analysis report, ratio tables) intended to facilitate 
diagnostics which must be drawn up by the inspector. 
This software is used in the inspections administering taxpayers' files. It may, for 
example, allow greater depth in the desk control relating to a taxpayer who has 
previously been selected on the basis of information from other Member .States 
concerning intra-Community VAT. 
IRELAND: 
None 
ITALY: 
In Italy an expert system assisting tax inspection is currently being tested at the tax 
authorities and the Guardia Finanza. The system provides users with two types of 
quite distinct functions. The first function provides operational support for 
computerising inspection activities. The second function is a decision-making one 
and provides indications and suggestion for identifying tax evasion using control 
functions. The expected advantages from using the system are that inspection 
activities will be speeded up and standardised and know-how can be shared for the 
purpose of training less experienced users. 
LUXEMBOURG: 
The Luxembourg tax authorities are currently studying expert systems similar to 
ESKORT to find out the minimum amount of information required to make a 
computer system economically viable and whether such systems can be rapidly 
adapted to suit the authorities requirements. 
NETHERLANDS: 
An expert program ESCORT has been developed to assist the preparation and 
supervision of controls. Data from central systems can be downloaded onto 
ESCORT and then compared with data from the trader's own accounts. The 
program also provides technical back-up for the various taxes and assistance in the 
design of the control programme. It is also used for processing the results of 
controls and producing the inspection report. Officers carrying out controls are 
supplied with portable personal computers so that they can use the program in the 
course of inspections. 
PORTUGAL: 
None. 
SPAIN: 
None 
UNITED KINGDOM: 
VATPACE (VAT portable applications in a control environment) used in VAT 
Collections. 
DOS based and containing a suite of applications and utilities, it enables visiting 
officers to concentrate more on matters of judgement rather than routine. 
Currently Windows based systems (for even greater flexibility) are being developed, 
also added will be options for accessing a trader's historic return submission date, 
and an EC VAT registration number verifier. 
Annex 8 
VAT REFUNDS - CONTROL TECHNIQUES APPLIED 
BELGIUM: 
The individual taxpayer files to be checked are selected by an automated procedure on the 
basis of various parameters designed to establish the plausibility of the tax credits 
declared. The files selected are examined on the basis of the dossier in the tax authorities 
possession or at the taxable persons head office on the basis of the accounts and the 
documents which the latter must keep in accordance with the VAT legislation. 
In addition, the amount of VAT repayable, for which an express claim for repayment has 
been made, is checked systematically. This is done at the control office on the basis of the 
original documents supporting the claim and, if necessary, on the spot when the request is 
made by person established in Belgium. 
The plausibility of the quarterly returns is checked for each taxable person concerned 
using a variety of criteria. These criteria are based on an examination of the individual 
situation of the taxable person and a comparison of a number of factors, including: 
- pre-existing VAT debt(s); 
- taxable person having commenced activity less than two years previously 
- amount to be repaid in relation to the system for sending in returns (turnover); 
- comparisons of the amount to be repaid with the amount of repayments for the 
previous four quarters; 
- entry on a repayment control list during the previous year; 
- so called "risk" sectors. 
Certain taxable persons in possession of an authorisation issued by the administration may 
obtain monthly repayment of their tax credit when this reaches BFR 10 000. These are 
taxable persons, who in the course of the previous calendar year, have carried out exempt 
transactions (exports, intracommunity deliveries, etc.) to a value at least 30 % of their 
turnover and who, in the same period, have had a tax excess of BFR 500 000 or more. A 
list of these taxable persons requesting the repayment of their tax credit is drawn up for 
each VAT control office on the basis of information from the periodic returns. 
DENMARK: 
A series of control data has been drawn up from the computer system for the purposes of 
planning controls of VAT refunds (payments control). This information is drawn up in 
respect of seven specific categories: 
1) Negative returns from normal firms which do not come under category 7 and 
which meet one of the following conditions: 
- negative tax liability exceeding DKR 50 000 
- negative tax liability between DKR 15 000 and DKR 50 000 or of more than 
DKR 30 000 in the last two periods without payment controls. 
-2-
2) Negative returns exceeding DKR 2000, which do not fall under category 7 or 1 
and which meet one of the following conditions: 
- negative tax liability of between DKR 15 000 and DKR 50 000; 
- total arrears exceeding DKR 2000; 
- at least one missing return; 
- more than DKR 30 000 in negative tax liability in the latest four settlement 
periods without a control; 
- VAT-registered for less than nine months; 
- control leading to adjustment within the last two years: 
3) Negative returns exceeding DKR 2000 which are not in categories 7, 2, or 1. 
4) Negative returns from firms with monthly or weekly settlement (special control 
procedures). 
5) Negative returns from firms with a credit limit. 
6) Negative returns, with the exception of ex post negative returns obtained as a 
result of controls 
7) Negative returns from normal firms currently subject to guidance or controls. 
From these control lists, computer searches and any information in the firms file, a 
decision has to be taken on whether the returns can be approved on the basis of the data 
available (possibly supplemented by telephone calls to the firm) or whether a control of 
the firm is necessary. 
The purpose is to identify returns where there is a risk of a refund being wrongly granted, 
especially returns in categories 1, 2, 5, and 6. The basis for the negative tax liability is 
examined during the control of refunds, i.e. both the firms sales and purchases are checked 
to ensure that the tax liability is in conformity with legal provisions and the firm's 
activities. 
NETHERLANDS: 
Each trader is assigned an individual negative norm in the computerised VAT 
administration. New traders are automatically given a negative norm of 1 guilder. The 
result of this system is that all negative returns and claims for refunds which exceed the 
norm are singled out and examined by the administration. This may be done by examining 
the file, requesting documents (invoices etc.) or by conducting an inspection on the spot. 
Inquiries may also be made with third parties, for example the party issuing a particular 
invoice. The necessary internal control measures are taken within the Tax Department to 
ensure that decisions on claims for refunds are correct. 
H 
3-
PORTUGAL: 
Overall the procedures take account of the States need to establish the legitimacy of 
refunds in an effective way with adequate guarantees as far as this is possible, and they 
also aim to avoid burdening companies with extra costs which could jeopardise their 
competitiveness. 
So, instead of a guarantee, taxable person may: 
a) in the case of intracommunity transfers, submit a declaration issued by the credit 
institution which is handling the transfer, providing that the sale price amount has 
been or is to be transferred by the institution. 
b) in the case of exports to third countries, submit a photocopy of the export document 
issued by the relevant customs office. 
In addition to any inspection visits to companies which may prove necessary, the 
legitimacy of refunds is also verified by the tax authorities carrying out internal checks on 
applications for refunds of over 1,5 million escudos. For this purpose, taxable persons 
must provide certain supporting documents enabling an initial check to be carried out on 
the authenticity and legitimacy of the credit in question. 
If the data analysed indicate that an on-the-spot check is needed, an external inspection 
will be conducted. 
UNITED KINGDOM 
Checks are carried out on claims and only indirectly on "traders" in the first instance. 
Claims are subject to a series of separate automated test. The tests at their simplest 
compare the amount currently claimed with past claim history, taking account of the 
trader's reliability if known. Claims from newly registered traders and first, or infrequent, 
claims from other traders undergo additional tests, designed to help identify potential 
fraudsters. The value of the claim is used to decide automatically whether a credibility 
query should be raised and, if so, whether inquiries before or after repayment of the claim 
appear justified. Each test comprises a number of components for which variable 
parameters (in a pre-set range) are applied. Adjustments to parameters is a feature 
targeting the control effort. Stringent security is maintained over this operation. 
Claims which fail the automated test are subject to manual scrutiny. Those claims which 
have not yet been paid are examined centrally by people who have immediate access to 
additional data and who are empowered to make decisions on whether repayment may 
now be made, and whether any further inquiries are needed post payment. Further 
inquiries are referred to VAT Offices whether visits to the traders are appropriate. Most 
inquiries on unpaid claims, and fewer on paid claims, require immediate visits by control 
staff. 
Annex 9 
VAT REFUNDS » 
The number of controls carried out and the number and value of refunds made (in millions of national currency), in the years 1991, 
1992 and 1993 
Member 
State 
Belgium 
Denmark 
Germany 
Greece 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
Spain 
United 
Kingdom 1991 
N° 
controls 
9 687 
14 647 
6 800 
151 000 Vol. 
620 738 
124 956 
145 308 
3 869 
71405 
2 500 000 Value 
163 
109 993 
133 
878 
11893 000 
5 995 
319 333 
23 000 1992 
N° 
controls 
10 058 
14 014 
5 671 
200 500 Vol. 
624 806 
120 297 
148 069 
5 820 
788 000 
63 340 
2 400 000 Value 
167 
95 302 
135 
923 
14 466 000 
7 148 
15 290 
297 490 
23 500 1993 
N° 
controls 
9 268 
13 000 
6118 
193 500 Vol. 
636 844 
102 757 
136 098 
5 836 
782 000 
49 853 
2 300 000 Value 
1994 
134 500 
118 
772 
10 610 000 
7 121 
14 402 
226 579 
• 
23 500 
Source: Member States Responses to E.C. Questionnaire 1994 
-v_i 
ï? 
Annex 10 
CO-OPERATION WITH OTHER MEMBER STATES AND/OR 
THIRD COUNTRIES IN COMBATING VAT -FRAUDS (IN 
ADDITION TO THE MUTUAL ASSISTANCE PROVIDED FOR 
UNDER DIRECTIVE 77/799/CEE OF 19.12.1977) l 
BELGIUM: 
The Benelux Convention on the recovery of Taxes of 5th September 1952. 
The agreement of 29th April 1969 on administrative and criminal-law co-operation 
in the matters of regulations connected with the realisation of the Benelux 
Economic Union and the supplementary protocol laying down special provisions 
concerning taxes. 
The special agreement between Belgian and France. Direct and immediate co­
operation procedures are being tried in the VAT field. 
VAT-controls of multinational companies on an experimental bases are being 
undertaken in co-operation with UK, Denmark and Spain. 
DENMARK: 
The Nordic Assistance Convention Article 12 concerning assistance in tax 
matters. Several simultaneous audits have been carried out. 
VAT-controls of multinational companies on an experimental bases are being 
undertaken in co-operation with UK, Belgium and Spain. 
GERMANY: 
No indication. 
GREECE: 
Bilateral co-operation with USA and Scandinavian countries. 
FRANCE: 
Tax conventions providing for assistance in recovery of VAT with Monaco, Benin, 
Burkina Faso, Cameroon, Central African Republic, Ivory Cost, Gabon, 
Madagascar, Mali, Mauritania, Niger, Senegal, Togo and Mayotte. Assistance 
occurs when the VAT debtor is established in one of these countries or in 
Mayotte and the proceedings taken in France have not allowed the debts to be 
recovered. 
Bilateral experiment in VAT control with UK. 
IRELAND: 
Memorandum of Understanding with UK HM Customs & Excise of 29th July 
1992. The MOU provides for operational co-operation regarding the risk to tax 
revenues in trade between Northern Ireland and the Republic of Ireland. A 
programme of audit and control visits is agreed each year whereby traders 
involved in cross-border trade are selected for control action. 
Source: Member States Responses to E.C. Questionnaire 1994 
-2 
ITALY: 
Agreements on undertaking simultaneous control exercises with USA, France and 
Austria. 
LUXEMBOURG: 
The co-operation of Benelux countries (see BELGIUM above). 
NETHERLANDS: 
The co-operation of Benelux countries (see BELGIUM above). 
Administrative assistance arrangements with the following countries relating to 
VAT on imports, exports and transit of goods: 
-agreement of 7th September 1967 with Belgium, Germany, France, Italy and 
Luxembourg on mutual assistance between the various customs authorities 
-agreement of 20th December 1983 with Norway on mutual administrative 
assistance in customs matters 
-agreement of 20th March 1985 with Sweden on mutual administrative assistance 
in customs matters 
-agreement of 4th April 1984 with Finland on mutual administrative assistance in 
customs matters «* 
PORTUGAL: 
Discussions have begun with Spain with a view to drawing up a protocol on 
bilateral co-operation in the area of intracommunity VAT control. 
SPAIN: 
VAT-controls of multinational companies on an experimental bases are being 
undertaken in co-operation with UK, Belgium and Denmark. Discussions with 
Portugal (as above) 
UNITED KINGDOM: 
VAT-controls of multinational companies on an experimental bases are being 
undertaken in co-operation with Belgium, Denmark and Spain. 
Bilateral experiment in VAT control with France. 
Co-operation between Northern Ireland and the Republic of Ireland (see 
IRELAND above). 
•/ û 
Annex 11 
Information access on debtor's financial position 1 
Type of information Member States 
1. Tax registers and records B, DK, D, E, F, I, L, P 
2. Other registers and official sources 
- courts B 
- mortgage B, GR, F 
- land IRL, P, DK 
- vehicle F, P, DK 
- commercial and business DK, F, IRL, P 
3. Banks DK, E, F, I, NL ~ 
L D, GR, IRL, P (exceptionally) 
not allowed in L 
4. Third parties DK, D, E, F, NL, UK 
Source: Member States Responses to E.C. Questionnaire 1994 
'r 
Annex 12 
Bankruptcies. VAT written off or remitted in millions of national currency in the 
years 1991-1993. 
Member 
State 
B (1) 
DK 
D (2) 
GR 
E (3) 
F (2) 
ERL (3) 
I 
L (4) 
NL 
P 
UK 1991 
Bankruptcy 
amount 
72,2 
334,3 
32420,0 
6,0 
27,7 
509,8 Pet. of to­
tal revenue 
0,015 
0,186 
4,880 
0,298 
0,120 
1,505 1992 
Bankruptcy 
amount 
4,5 
689,0 
35970,0 
4,0 
39,2 
530,6 Pet. of to­
tal revenue 
0,001 
0,348 
5,373 
0,184 
0,151 
1,413 1993 
Bankruptcy 
amount 
6,2 
813,1 
22257,0 
40210,0 
2,0 
77,4 
1289,6 Pet. of to­
tal revenue 
0,001 
0,376 
6,314 
0,089 
0,269 
3,419 
(1) Insolvency: 172,2 (1991), 135,7 (1992), 24,2 (1993). 
(2) Including composition proceedings. 
(3) Liquidation amounts (bankruptcy procedure seldom used). 
(4) Including write-off. 
Source: Member States Responses to E.C. Questionnaire 1994 
Annex 13 I 
DEFERRED PAYMENT ARRANGEMENTS l 
YES NO 
Local decision B, DK, D, E, F, I, NL, UK " GR, IRL, L 
or central decision? DK, GR, IRL, L (above certain amounts) F, UK 
B, E, D, I, NL 
Maximum time? D (Instalment) D (Deferment) 
- up to 6 months DK (3m), GR (2-4m), UK 
- up to 1 year B, I, L, NL 
- up to 3 years ERL 
- more E, F 
Rescheduling possible? B, E, F, D, I, NL, UK IRL (only exceptional), L 
Revocable? B, E, F, D, IRL, I, NL, UK 
Interest charged? all Member States except UK UK 
Rate higher than bank rates? B, DK, GR, F, IRL, L E, D, NL 
Refusal if bad payment history? B, E, IRL, I, NL, UK D (but closer observance) 
Obliged to pay current tax? B, DK, E, D, IRL, L, NL, UK 
Measure agreed if 
a) other finance possibilities IRL B, DK, GR, F, L, NL, UK 
available? except case 3 below: E, D (instalment) D (deferment, except case 1 below) 
except cases 2, 3 below: I 
b) guarantees? ~~~ IRL, L GR, UK 
except cases 2, 3 below: I, NL D (deferment, except case 1 below) 
except case 3 below: B, DK, E, F, 
D (instalment) 
c) serious distress by GR NL, UK 
enforcement? except case 3 below: DK, E, F, D, IRL 
except cases 2, 3 below: I 
d) imminent bankruptcy? all Member States 
1. if distress due to reasons not to except case d) above: DK, E, F, D, IRL, I 
be influenced by taxpayer except cases a), c), d) above: NL, UK 
2. negligence except case d) above: DK, E, D (instal- I, NL, UK 
ment), IRL 
except case c) above: D (deferment) 
3. abuse, fraud : B, DK, E, F, D, I, NL, UK 
IRL: except cases a), b) above 
Notes 
In Portugal VAT is not deferrable 
Source: EC VAT seminar Londo i 1994 
y.) 
ANNEX 14 
NATIONAL OBJECTIVES AND KEY PERFORMANCE INDICATORS 1 
MS Comment 
B The two main national objectives reported are: 
- that at least 50% of the files controlled relate to persons carrying out intra­
community transactions (1993). 
- 20% of persons filing a return under Article 53b of the VAT code will be 
controlled for the whole of 1993. 
DK Total goals for the control of revenue are determined, but they are not 
specified for different types of control visit or on VAT. From 1994 'contracts1 
are being agreed with regional offices on the definition of objectives and the 
allocation of resources for the following year. 
D There are no quantitative objectives. Large firms to be inspected every 4 years 
for all exercises. 
E No specific objective or indicators reported. 
F Performance indicators set include: 
- rate of implementation of the verification programme 
- number of reminders sent and abandonments sent 
- amount of penalties applied 
- number of criminal proceedings 
GR Target yields from controls expressed as à proportion of overall VAT revenue. 
Target for the number of controls expressed as a proportion of the annual 
number of VAT account final declarations 
I A comprehensive range of 47 indicators are used to monitor and compare the 
administrative offices functions on a national, regional and local basis. These 
fall under the following main headings: 
a) the measurement of quantitative objectives (6 indicators) 
b) utilisation of staff resources (7 indicators) 
c) measurement of qualitative objectives (15 indicators) 
d) evaluation of results obtained (19 indicators) 
IRL Specific objectives and indicators are currently being developed. 
L Local rather than national objectives applied. No Performance indicators used 
specifically. 
NL No specific objectives or indicators reported. 
P Computerised system for Performance indicators (SIG) integrated to annual 
national inspection plan to measure quality and quantity of the effectiveness of 
inspection departments. Efficiency indicators measure resources used: time 
taken, number of staff involved and miscellaneous costs. Performance 
indicators measure extent to which goals in annual plan are met with regard to 
quantity i.e. number of operations and quality, corrections to the taxable base 
and corrections to underpaid tax. 
Combining efficiency and performance indicators gives an indication of cost 
effectiveness. 
Source: Member States Responses to E.C. Questionnaire 1994 
yv 
-2-
National objectives: 
- to ensure management, collection and payment on time of VAT 
-to maximise the potential yield by targeting resources effectively and 
encouraging voluntary compliance by businesses 
- to provide businesses with full and understandable information about VAT 
Efficiency indicators include: 
- gross and net underdeclarations found on assurance visits 
- net additional liability found per half day 'session* of allocated assurances 
resources 
- achieving progressive reductions in VAT arrears. 
1( 
Annex 15 
Estimates of Cost Performance in administering VAT 1 
Member States Cost Performance Pourcentage of VAT 
Estimate income 
Yes/No 
_ _____ 103% 
~D Ye* c. 2% 
_ __ 
"I Yes 0.8-1% 
_ __ __ 
~GR Yes c. 2% 
1 ~ 
IRL Yes ' c/1% ~~ 
_ _ _ _ _ 
__ _ __ __ 
PT Yes No figures supplied 
~UK Yes^ 08% 
Note 
i) For those Member States for which a cost estimate is shown the costs are expressed 
as a percentage of the VAT receipts in the year. 
ii) Some Member States do not undertake such exercises (L, I, DK) whilst some others 
do not carry out the exercise each year (B, D, GR). 
iii) The specific costing methodologies used by the individual Member States were not 
communicated (except NL). ' 
1 Source: Member States Responses to E.C. Questionnaire 1994 
ft 
ANNEX 16 
DEFINITION OF EVASION AND ABUSE OF THE LAW 
MS Comment 
B Distinctions between individual and organised evasion are only made on a local 
basis by the controlling officials. 
DK No distinctions made between individual and organised evasion of tax. 
D Tax abuse is where a legal contrivance is used that is excessive in comparison 
with the aim pursued, is designed to reduce tax and cannot be justified on 
economic or other significant non-tax-related grounds. 
Tax evasion is where there is deliberate deception of the tax authorities as' 
regards a taxpayer's circumstances to obtain a reduction in taxes or 
unwarranted tax advantages. Deception may involve giving the tax or other 
authorities incorrect or incomplete details of facts relevant for tax purposes or 
failing to inform the tax authorities of such facts where required to do so. 
E Not reported. 
F There is no definition of tax avoidance either in law or in court judgements. 
The tax authorities do not distinguish it from evasion. 
Tax evasion presupposes both an element of intent (will to escape the tax) and 
a material element (recourse to illegal proceedings, such as absence of return, 
dissimulation of income). It therefore constitutes an infringement of tax law. 
No distinction is drawn between individual evasion and organised evasion. 
GR There is a distinction between tax evasion and abuse of the law. In the latter 
case the tax is levied. Tax is charged together with fines and surcharges if 
appropriate. 
I One of the differences between fraud (e.g. issuing or using invoices for 
fictitious transactions) and evasion (e.g. failure to invoice taxable transactions) 
is that the former is always subject to criminal penalties in addition to the value 
of the evaded tax, whereas the latter is an offence only if the evaded tax is over 
a certain amount fixed by law. Otherwise, only administrative penalties may be 
applied. Another difference is that in the case of evasion traders are entitled to 
make amends voluntarily within certain deadlines and have the penalties 
reduced, whereas in the case of fraud this opportunity is excluded. 
No distinction is made between individual fraud and organised fraud. 
Source: Member States Responses to E.C. Questionnaire 1994 
ir 
IRL From an operational viewpoint there is usually no distinction made between 
evasion and abuse of the tax. What appears in the first instance to be abuse of 
the law may in the final analysis turn out to be evasion. 
Organised evasion (e.g. collusion between parties to defraud) may result in 
heavier monetary penalties and/or criminal prosecution depending on the 
evidence. 
L Reported not applicable. 
NL Evasion is understood in the Netherlands to mean contravening the statutory 
regulations. A taxpayer who is found to have evaded tax receives a 
supplementary assessment and may be liable to penalties. Avoidance is taken to 
mean acting in a way that is contrary to the spirit of a provision of national or 
European law but without actually contravening a statutory regulation. 
Avoidance can only be combated by amending the national legislation, if 
necessary after obtaining authorisation from the Council of the European 
Communities to derogate from a Directive. 
It is reported as being impossible to make a distinction between individual and 
organised fraud. 
P In Portugal there is no distinction between fraud and abuse of law. 
A distinction is made between tax crimes (crimes fiscais) and tax offences 
(contra-ordanaçôes fiscais) in the legal framework for tax offences other than 
customs offences (RJIFNA). 
Tax evasion covers unlawful practices with the intent of not settling, remitting 
or paying tax or unduly obtaining tax benefits, refunds or other financial 
advantages which would reduce tax revenue. 
UK The investigation of evasion must prove intent and dishonesty and is dependant 
upon many issues, including the size of the fraud. Investigations are either 
criminally or civilly based. Individuals or companies can be, and are, held liable 
for both penalties and arrears. Where there are concerted attacks on the 
"system", the first option will normally be to prosecute. 
ANNEX 17 
MEASUREMENT OF EVASION ON A NATIONAL SCALE 
MS Comment 
B No specific data or procedures. 
DK No specific data or procedures. 
D No specific data or procedures. 
E Not reported. 
F Trends monitored in the results of tax controls and fiscal receipt forecasts 
against actual returns. 
GR Comparisons of macroeconomic data (private consumption and investment 
against family budgets). 
I The impact is measured by comparing the data from assessments made with the 
data on traders VAT returns. 
IRL No procedures operating at present 
L A feasibility study is currently being performed by the National Statistical 
Institute (STATEC). 
NL No specific data or procedures. -
P The number of new verification proceedings are monitored daily. 
UK There is continuous monitoring of crirninal and evasion statistics from which 
then is produced a national profile each year. 
Source: Member States Responses to E.C. Questionnaire 1994 
o, 
Annex 18 
TYPES OF EVASION AND TYPICAL SECTORS 1 
Evasion commonly takes several familiar forms and arises more frequently in certain trade 
sectors than others. 
Types of Evasion 
- Failure to issue invoices 
- Issuing of false or fictitious invoices 
- Underdeclared sales 
- Exports to non-Member States 
- Amounts deducted twice 
- Displacement of period 
- VAT deducted without supporting documents 
- Credit notes not booked 
- Undeclared or falsified intracommunity purchases 
- Fictitious intra-community deliveries 
- Companies with short lives who register and disappear 
- Use of wrong VAT numbers / fictitious firms 
- Fictitious livestock exports 
Typical high risk sectors 
- Manufacturing 
- Trading and distribution 
- Construction 
- Service Sector 
e.g. employment agencies; hotels and restaurants; supply to private individuals 
- Transport vehicles 
- Commercial intermediaries 
- Whole sale and retailing traders 
- Clothing 
- Drinks, brewing 
- Cash and carry 
- Livestock 
Source: Member States Responses to E.C. Questionnaire 1994 
AJC 
ANNEX 19 
COUNTERING ORGANISED FRAUD AND EVASIONS 
AN EXAMPLE 
Below the Commission summarises the presentation made by DK - at the second seminar 
in Bonn (November 1993). This is a practical example of a control exercise carried out 
against organised fraud in the cleaning sector in the Copenhagen region. 
A co-ordinated and simultaneous control operation yielded around DKR 100 million with 
a further DKR 50 million expected in fines. 
The investigation was initiated as when VAT evasion was detected in the form of turnover 
shrinkage in the cleaning companies. 
The Danish identified a systematic evasion method. Companies would have a short life, 
initially submitting correct VAT returns and paying the amounts due, but then after 6-7 
months stopping their returns and payments. 
If a firm was considered for control it would stop trading, only to re-emerge as a new 
legal entity continuing the same business activities, with the same staff and customers, but 
a new manager. 
Using their VAT database the Danish administration undertook a search using various 
parameters to identify the companies to be controlled and additional information sought. 
PARAMETERS 
Age: company no more than 2 years old 
Names: similar sounding: spelling of successive company names. 
Turnover: compared with payroll costs 
ADDITIONAL INFORMATION 
- Hotels and restaurants were asked to supply the names of cleaning firms used and the 
total contract price . 
- Copies of cleaning contracts requested. 
One region selected 40 cleaning companies for control. Control was done by unannounced 
visits to companies to collect all relevant accounting materials (e.g. invoices issued by the 
company; purchase vouchers; wages and salaries accounts; customer files; contracts). 
Assets of companies were confiscated. 
•c 
NATURE OF DISCREPANCIES DISCOVERED 
The underlying fraud discovered was to conceal the costs of staff by drawing up false 
invoices from a subcontractor for the amount which has been partly used for undeclared 
payments to the labour force and partly for the operators own profit. Thus 
- customers are omitted from company turnover 
- use of fictitious supplies i.e. companies established exclusively to provide legal 
documentation for expenses who disappear very quickly. 
CONSEQUENTIAL EVASION 
Such VAT evasion often indicates evasion in the direct income tax, social services, and 
unemployment funds as staff draw public benefit while receiving undeclared income from 
such firms. The Danish identified an impact on VAT and other particularly direct income 
taxes. 
A number of the organisers have disappeared often leaving the country. Police and 
customs staff are alerted. 
RESULTS AND FINDINGS 
Summaries were communicated to other regions for information. 
In total 31 of 40 cases irregularities discovered. In 21 of 40 cases reports prepared with a 
view to prosecution. 
The success of the operation in terms of control results (potentially DKR 150 million) was 
qualified by the inability of many traders to pay. This involved a considerable increase in 
VAT arrears. Seizure of firms assets reduced this potential loss by about 10%. • 
- the control operation effectively stopped the firms and stifled the activities. The users of 
such services hotels and restaurants are now less motivated to use them. 
- this control case received wide media attention in Denmark. 
Source: EC VAT Seminar Bonn 1993 

ISSN 0254-1475 
COM(95) 354 final 
DOCUMENTS 
EN 09 06 
Catalogue number : CB-CO-95-380-EN-C 
ISBN 92-77-91823-3 
Office fox Official Publications of the European. Communities 
L-2985 Luxembourg