Value Added Tax
- I. Introduction
- II. The results are above the average
- III. The tax account settlements VAT processing
- IV. Current activities in the first tax period
The first practical experiences in the tax administration of the Republic of Slovenia in the field of VAT - The evaluation per 31 august 1999
I. Introduction
The Tax Administration has received the great majority of the VAT returns for the first tax period (July 1999) in the last days of August and early in September.
This report has been prepared immediately after the data entry was completed. Certain changes will arise during the process of control and auditing so we expect the final results of the first tax period to be better than the one represented here.
The basic questions, which require intelligible answers, are:
- which results were achieved in view of the expectations and
- what kind of results were achieved in comparison with the previously applicable sales tax.
II. The results are above the average
This statement is founded on the basis of such criteria as:
- financial expectations
- fulfillment of the taxpayer's obligations
- the price movement in the general economy
- managing of the system in TARS (Tax Administration Republic Slovenia) the project costs.
| 1 | 2 | 3 | 4 | 5 | 6 |
| Average sales Tax 1998 | Average expected VAT | Sales tax Jul'98 | Actual VAT Jul'99 | 4:2 | 4:3 |
| 34 | 32 | 26 | 30,5 | 95 | 117 |
| Including Excise Duties | 18,5 TARS "net"12,0 CARS |
Note:
The average monthly yield VAT has been planned by The Institute for
Economics and Business at the Law Faculty of Ljubljana, the author is
magister (Master of Science) Mr. Velimir Bole.
The amounts of the collected sales taxes in July are under the average due to the seasonal fluctuation.
II.1 Fulfillment of the tax obligation
| monthly taxpayers | 59.413 |
| received VAT returns | 57.432 |
| missing | 1.981 (3,3%) |
| Taxpayer Obligations | (Bill SIT) |
| Calculated | 26.115 |
| Paid | 25.927 |
| Non Paid | 188 Mio (0,7%) |
Note:
Based on foreign experiences we have anticipated somewhat larger
number of non- presented tax account settlements. Calculated due
amounts on the VAT returns were highly covered by regular on time
payments. The outcome after the accomplished enforcement will be most
likely even better.
II.2 The price movement in the general economy
Table: the price movement for a standard basket of goods after the VAT implementation.
The planned effect of the VAT implementation on prices made by the Institute for Economics and Business has been at 70% of the expected inflation on the annual level.
The presumptions were 1,5% rise of the real wages, 4% growth of GNP (gross national product), 5% of the inflation on the annual level and accordingly, after the implementation of VAT, the rise of the relative price by 3,5% points. The presumptions have proved real.
The actual rise of prices in the period, June 16th to August 11th 1999 is 2,56% for the time being which represents a better results than planned, however the prices are not stable yet. Half of the value is going to be the influence on the annual level as it comes to the half-yearly period.
The independent Consumers' Association of Slovenia monitors the data of price movement. They run the campaign of awareness "Price Watch" which is a part of the activities related to the VAT implementation.
II.3 Managing the vat system by the tax authorities
During the preparations of the VAT implementation we have defined and improved:
- the organization (funds and staff available),
- the micro working procedures,
- the central control system and co-ordination and support for operations
- the technique of quick learning and error correction procedures.
The VAT implementation would not have been possible without the IT support. The most critical activities in the project were related to the acquisition of the computer and communication equipment and to the setting up the appropriate project group for in-house development of supporting applications. At this stage of the project it can be concluded that implementation in real environment has been practically carried out with no significant problems.
II.4 The project's costs
Direct costs of the VAT implementing are lower than planned in all items. We achieved the biggest saving in the IT area. At first we planned to purchase software, we changed this decision afterward.
We have spent 33% of planned funds. The final statement of accounts has not been done yet. There have not been the indirect costs, meaning the deficit of the state budget predicted by all the external advisors except some rare exceptions.
III. The tax account settlements VAT processing
III.1 Review of the basic processes
The starting point is at TARS by sending the VAT return (DDV-O) and a payment slip to the taxpayer. Feedback flow runs in two directions, first along that of the VAT form and the second that of the payment. Taxpayers send the settlements directly to the Tax Administration, Agency for Payment mediates the payment data. There is the exchange of information between the Treasury (Ministry of Finance) and the Tax Administration both on payments and on claims for refunds. The Customs Administration and the Tax Administration exchange data on imports and exports and share data comprised in the Taxpayers Register.
Sending of preprinted return form and a payment slip to the taxpayers has proved to be effective reduction of errors and has increased the efficiency of the data entry rate. The tax forms are namely equipped with a bar code.
III.2 The procedures at the tax account settlements' reception and data entry
The scheme represents three complexes of functions:
- the envelopes are open, the return forms are stamped and distributed among the tax officers in the receiving office. The VAT return forms are equipped with a preprinted tax officer's identification
- the tax officer receives returns of the assigned taxpayers and divides these into groups on the basis of defined criteria
- the tax officer scans bar code and records the identification data of the taxpayer into the computer system. Thereafter data from the VAT return are entered.
The expeditious work is thus enabled as we pursue the goal to accomplish all described functions within three days. Each tax officer has been assigned 500 taxpayers.
III.2.1 Status of the VAT settlement
The tax officer has to define the status of each VAT settlement at
the point of data entry into the computer system:
0 scanned, received
1 irregular or incomplete, not acceptable for further processing
2 investigation in greater detail pending
3 inspection pending
9 without errors, posted in bookkeeping records.
The tax officer defines special status in case of non-completed investigation or inspection as -2 or -3 respectively and the tax period is closed for the taxpayer in question. It actually means that the audit or inspection is in process and the account will be updated with results from these actions.
| STATUS | Number | share | obligation | surplus | |
| 0 | received | 884 | 1,50% | 0 | 0 |
| 1 | with errors | 11.422 | 19,88% | 5.130 | 1.883 |
| 2 | Investigation pending | 14.961 | 26,00% | 10.037 | 5.221 |
| 3 | Inspection pending | 222 | 0% | 1.689 | 457 |
| 9 | accounted | 29.943 | 52,13 | 10.946 | 213 |
| 57.432 | 100,00% | 27.802 | 7.774 |
There is a high share of the VAT returns with status 1 according to the above table. At the beginning the tax officers have been fairly uncertain and cautious, however, the situation is improving rapidly as they resolve several calculated errors through the contact with the taxpayers. The specially trained VAT instructors have contributed with valuable practical support.
The most frequent formal errors made by taxpayers are as follows:
- empty fields not filled with zeroes or deleted
- missing balances as a difference between input tax and output tax
- missing information in the form etc.
We have got 7% different filled in returns forms from those sent to the taxable persons.
IV. Current activities in the first tax period
- The tax account settlements analysis on the macro level shows:
- the global data accordance
- analysis of each section
- preparation of a model for VAT planning
- Data exchange with the Customs Administration and the Ministry of Finance (Treasury)
- Direct technical expert support for tax officers and flesh auditing (workshops, help desk)
- Selective approach with inspection and sanction
- Help desk for taxpayers. At the present moment we are performing an educational and informative programme "Bills, records of bills, fulfillment of tax account settlement VAT".
Prepared by: Tax Administration Office