Update: IMF criticizes ANAF and makes recommendations

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IMF has criticized the National Agency for Fiscal Administration (ANAF) after a control conducted by the international experts to the Directorate large taxpayers in April this year. It points to the inefficient controls and bad solutions that tax inspectors adopt, digi24.ro reports.

The IMF experts were unhappy that tax inspectors are working in hotel rooms, however they come with recommendations for the ANAF staff.

ANAF should cover the costs when one of its inspectors is sued because now the fear of being obliged to cover the costs from his own pocket generates a ‘paralysis’ among tax inspectors.

IMF also criticizes the lack of facilities and the directorate’s too small budget.

The limited number of laptops and printers for the DGAMC staff is an issue that affects productivity. Limitations on budget and staff recruitment of DGAMC impedes the ability to position itself better in order to address the pressing fiscal risks, reads the report, according to the quoted source.

IMF’s findings:

  • About 46 percent of annual Large Taxpayer Office (LTO) audit resources are used on VAT refund issues with material results only in about 10 percent of the conducted audits. In advanced administrations, VAT refund audits occupy a very small percentage of LTO resources (less than 5 percent). Risk analysis and prioritization should direct audit activities towards VAT refund claims posing major risks. The resources saved should be utilized to audit issues of more significance in terms of safeguarding major revenue streams.
  • The time used for each audit is excessive compared to international standards. In Romania a VAT refund audit concerning a large taxpayer takes half a year on average, while in advanced administrations such audits typically take a day or less. The intense attention paid to ANAF audit activities by the Court of Accounts, together with the situation that auditors can be made accountable personally for any tax shortfall not discovered during the audits, are said to be the main reasons for these lengthy audits. The audit resources wasted on nonproductive audits are enormous.
  • Around a third of total annual audit resources are used on satisfying audit requests coming from the Court of Accounts, other parts of ANAF, and other authorities. These audits often produce very small results. It is said that efforts are often focused on “finding the last leu.”
  • The remaining 20 percent of total annual audit resources is mainly focused on audit plans developed “bottom up” (although there is minor ANAF HQ input). This is not a very strategic approach and the results are meager as a result.
  • There are also shortcomings in taxpayer services and collection enforcement, which weakens the LTO’s ability to impact effectively on taxpayer compliance behaviors. For example, taxpayer services are not tailored to address areas of major risks, but are rather responses to enquiries from taxpayers and accounting firms.
  • Finally, the assignment of large taxpayers to the LTO is not done in conformity with good international practices. Currently, the LTO struggles to manage about 2,392 taxpayers, who account for less than 50 percent of total tax revenue collected by ANAF. A more correct selection (using a different criterion) would assign 1,200–1,400 taxpayers to the LTO, who would account for up to 60 percent of total revenue. This means that currently the LTO taxpayer population includes taxpayers that should not have been included, while large taxpayers that should have been included have been left out and remain under supervision of regional or local offices.

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