Excise Duty Administration
Press release on completion of the auditing operation No. 05/34
The auditing operation was included in the Annual Audit Plan of the Supreme Audit Office (hereinafter referred to as “SAO”) for the year 2005 under No. 05/34. The auditing operation was managed and the audit conclusion drawn up by Mr. Rudolf Němeček, the Member of the SAO.
The audit aim was to examine how custom authorities and financial offices dealt with collecting and administrating these excise duties.
The audited period covered the years 2002 and 2003 as well as previous or following periods in certain cases of relevant connections.
The audited bodies were the General Directorate of Customs and selected financial offices.
The audit examined primarily the collection system of excise duties after 1.1.2004 when custom authorities took over administration responsibilities on the basis of the newly adopted legal arrangement. Concurrently, it was examined also a procedure, which was applied by financial offices enforcing outstanding excise duty registered by 31.12.2003 and administrating it after 1.1.2004.
The outstanding amounts registered by 31.12.2003 decreased by 16 per cent but it was reached mainly as a subsequence of write-off of irrecoverable claims. The audited financial offices enforced outstanding payments in the total amount to CZK 125,352,000 and wrote off CZK 9,305,000 in 2004. In 2005, they enforced outstanding payments of CZK 652,000 and wrote off CZK 243,418,000. Four tax subjects shared 92 per cent of the total outstanding amount by 31.12.2005; three of them were bankrupt at the time of the audit.
The Register of Tax Subjects responsible for recording of certificates to deal with selected products recorded some certificates to operate bonded warehouse and deposit selected products only after 21 months since they had taken effect. Selected data on bonded warehouse operators and certified product dealers are transmitted to the international database SEED, which serves to tax administrators for checking up whether a certified person deals with selected products. Erroneous or behindhand recording of data dispraises information value of the database and it can consequently result either in tax imposing in a different state than the consumption one or in tax dodging.
Personal account balances recorded by custom authorities did not correspond with the factual state. These irregularities occurred mainly in cases where an enforcing procedure had been already commenced but the corresponding due tax was recorded not until completion of the procedure. Shortcomings were found out in documenting of regulations and also in recording of payments in the total volume of CZK 2,821,930.
Custom authorities supervise transport of selected products in the regime of conditioned tax exemption and they record taxation during transport with support of the so-called EVV system (the register of environmentally acceptable products) by entering data from shipping documents elaborated when the transport had been approved. The audit detected many erroneous records by comparing of the shipping documents with the EVV data. By these irregularities, the lower taxation of transported selected products was determined by about CZK 12 million.
In the framework of auditing co-operation, the SAO and the Supreme Audit Office of Slovakia compared shipping documents of the selected products held by custom authorities in each of both countries and thereby examined how transports starting in the Czech Republic and finished in the Slovak Republic corresponded. It was found out that a tax subject transported selected products with tax-exemption unless it informed relevant custom authorities. It also failed to provide tax ensuring in the amount of CZK 1.2 million. Transported and unexcised selected products were during transport out of tax supervision.
Control of unexcised selected products’ transport is made more difficult by the fact that no single electronic system exists in EU, which would document and monitor transport of selected products being under excise duty. In order to lower risk of tax evasion, the General Directorate of Customs forwards since January 2006 to the other EU member states monthly overviews on transport cases of selected products in the regime of conditioned tax-exemption, which started in another EU member state and ended in the Czech Republic. However, analogous information has not been provided to the General Directorate of Custom from the other EU member states. Such a system (Project EMCS – Excise Movement and Control System) should be implemented since 1.7.2009 in compliance with the decision of the European Parliament and of the Council No 1152/2003/EC of 16 June 2003 on computerising the movement and surveillance of excisable products.
The legal arrangement of the tax ensuring does not make possible for tax administrators to increase the tax ensuring in cases when a bonded warehouse operator or a certified product dealer notifies an enhancement of expected yearly produced or taken over products after issuing of relevant licence or permission. The risk consist in a possibility that a tax subject could reach a lower notice of assessment by the intentionally underestimated declaration of expected products volume in its application for licence or permission. Provided that the tax subject notifies increase of selected products volume the tax administrator is not entitled to raise the tax ensuring on the basis of this notification.
The Custom Directorate (higher custom authority) can withdraw the relevant licence or permission in case of the bonded warehouse operator fails to ensure tax even after the Custom Office’s (lower custom authority) summons to fulfil the obligation of additional tax ensuring. The Custom Directorate can withdraw licence or permission from the certified product dealer only after imposing a fine by the tax administrator. With regards to deferring effect of appeal against imposing a fine, the certified product dealer can deal with selected products for still longer time unless the adequate tax ensuring is provided, thereby the payment outstanding risk rises.