Plenary meeting of the Working Group on VAT has begun

2018-09-28 08:18:00   |   Author: Dr. Véber Emília

Mr Krzysztof Kwiatkowski, President of the Supreme Audit Office opened the plenary meeting in Warsaw. Mr Wojciech Śliż, director of VAT department of the Ministry of Finance demonstrated the amendments to polish law implemented in 2016-2018. Mr Janusz Jasinksi, Deputy Director of the Organisation and Implementation Department of the Ministry of Finance, presented the re-organisation of Polish Revenue Administration. Prof Dr David Hummel gave an overview of the current VAT related jurisprudence of the Court of Justice of the European Union.

Mr Krzysztof Kwiatkowski, President of The Supreme Audit Office opened the plenary meeting in Warsaw. In his speech, he pointed out to the importance of the role of VAT in the polish national budget by demonstrating some statistics. Tax revenue covered 84% of state expenditure in 2017, VAT Revenue accounted for 49,7% of the total tax revenue. VAT gap in Poland is between 35-55 billion PLN. This weakness fuelled NIK audits in the recent few years. As a consequence of NIK audits, Ministry of Finance in Poland elaborated a wide scale of tools to hinder VAT scams. As a result of these provisions, VAT revenue increased from 123 billion PLN in 2015 to 157 billion PLN in 2017.

 

Mr Krzysztof Kwiatkowski, President of The Supreme Audit Office is delivering his welcome speech from the pulpit of the Lech Kaczyński’s hall. Before nominated as Prime Minister of Poland, Lech Kaczyński was the chairman of NIK. He is considered to be the founder of the modern audit in Poland.

 

Mr Wojciech Śliż, director of VAT department of the Ministry of Finance demonstrated the amendments to polish law implemented in 2016-2018. He stressed, that there is no single legislative resolution to diminish VAT gap, as the topic is very complex. In the last two years, Ministry of Finance in Poland had launched wide scale of measures to seal the VAT system. The most important provisions are highlighted below:


Similarly to our EKÁER system (Electronic Public Road Trade Control System), the Polish government elaborated the system of monitoring road transport of sensitive goods (SENT) for example motor fuels and their derivatives, fuel additives, heating fuels, lubricants, gear oils, vegetable oils, etc. Before this, in the frame of Fuel Package 2016, the Polish government obligated importers to pay VAT on fuel bought from another EU country within five days of the acquisition.
Among the new provisions, it is worth to mention the STIR system, which facilitates the exchange of information between National Tax Authorities and banking system. STIR system makes it possible to identify bank accounts established by fictitious companies.

 

Just like in Hungary, Polish government expanded the reverse change mechanism to construction services made by subcontractors, and to the trade of certain types of metal (platina, gold, silver). The newest measure in the polish legislation is the so called “split payment” mechanism, which means that the net amount and the VAT amount of an invoice is paid separately. Net amount arrives to the companies’ business account and VAT amount of the invoice hits the companies’ VAT account, but the access to the VAT account is restricted. The “split payment” system has voluntary character.

Mr Wojciech Sliz, director of VAT department of the Ministry of Finance is demonstrating the amendments to polish law implemented in 2016-2018. “In combating VAT fraud, it is essential to know the tax payer well and being able to track them, and follow the way of the goods and services, but the most important is to track the money.”

 

 

Mr Janusz Jasinksi, Deputy Director of the Organisation and Implementation Department of the Ministry of Finance, spoke about the re-organisation of Polish Revenue Administration. Just like in Hungary in 2010, the Tax Administration, Customs Service and Fiscal Control merged in 2017. The merge brought avalanche-like results, as the National Revenue Administration (KAS) serves the better use of human, financial and organizational resources.

 

Mr Janusz Jasinksi, Deputy Director of the Organisation and Implementation Department of the Ministry of Finance: “National Revenue Administration is the uniform guardian of the polish national budget.”

 

According to Prof Dr David Hummel, Advocate General at the Court of Justice of the European Union, the root of the problem is the indirect nature of VAT, as the tax is devolved to the ultimate consumer in the chain, which makes easy to fraud. Because of the indirect nature of the VAT, it is not possible to apply progressive VAT rate. Paying VAT is question of financial ability, so in case of bankruptcy, it is a good question who will pay the tax. Prof Hummel also drew attention to the fact that VAT focuses on the value of the goods and services, so by levying VAT on certain goods and services, state can not control the demand and supply of a good, meaning, that VAT is levied on a knife no matter if you brought it to slice a bread or to commit a murder.

 

Nowadays the main questions in the Court of Justice of the European Union is how to resolve the contradiction, where a conviction to punish a fraudster limits the right for VAT deduction of a taxable entity in good faith. The most difficult part of making a judgement is to find the exact distinction between „ knew or should have known, that a business partner took part in a fraud”. But how can an entity make sure that its business partner is in good faith? As VAT number has a reversible nature, this is not a reliable starting point.


Legal consequences of being involved in a fraud are the follows: no right for deduction, punishment via criminal law, no exemption for the intra- Community delivery. But these provisions are taxation and criminal procedure simultaneously, which is against the “ne bis in idem” (prohibition of dual proceedings) principle of the law.

 

Prof Dr Davil Hummel: “Ne bis in idem” is a principle of civil law since 2000 years. However, the Court of Justice of the European Union faces cases, where there is criminal and administrational procedures are ongoing simultaneously against a VAT fraudster.

 

 

As the closing of the event Mr Wojciech Kutyła, Vice-President of NIK analysed the replies to the questionnaire on the last decade’s experiences of EU countries in combating VAT fraud.

 

We will keep you updated about the events of the second day.

 

Ildikó Salamon
planning manager

 

dr. Véber Emilia
analyst