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Detecting and Tackling Tax Fraud, Tax Evasion and Corruption in Direct Taxation

On 15 – 16 October 2015 CSD organised a visit of Swiss Federal Tax Administration experts in Bulgaria. Mr. Emanuel Lauber, Head of the Division of Penal Affairs and Investigations and Mr. Dieter Krähenbühl, Deputy Team Leader of the Division of Penal Affairs and Investigations took part in the Annual Meeting of the National Revenue Office, giving a lecture on the 15th to an audience of some 50 tax office directors, senior inspectors from the regional offices and the central office leadership followed up by a working meeting with the directors of the risk assessment and policy analysis directorates.

Mr. Lauber introduced NRA to the structure of the Swiss tax administration and described briefly the methods of the fighting tax evasion and tax fraud. Although Switzerland and Bulgaria are structurally different from governance perspective and tax governance could not be directly transferred from Switzerland to Bulgaria, the preliminary analysis conducted by CSD suggests that there is a considerable body of transferable know-how in terms of detecting and tackling tax fraud, evasion and corruption in direct taxation.

Tax fraud and tax evasion are treated as different acts of violation of the law. Tax evasion is defined as the fact of not stating the full amount of one's profit intentionally, or by negligence. The cantonal tax administration deal with the problems of tax evasion and tax fraud. Mr. Lauber described the tools for investigation by his administration and concluded that it is basically interrogation. The perquisition, or other specific means for the criminal investigation are applied only in cases of significant violations.

In such cases cooperation between the cantonal and the federal tax administration is of high importance. The federal administration provides the cantonal with deeper knowledge about the illegal environment. Also, the federal administration has more rights related to investigation and thus cooperation between the two levels of governance contributes to the effectiveness of the overall process. As an indicator for risk, Mr. Lauber pointed the fact of “crossing borders” between the cantons, or the country boarders. This is considered as abusive behavior.

Mr. Krähenbühl focused on managing the risk of corruption in the tax administration. To minimize this risk the Tax administration is trying to maximize the trust in the institutions and their mechanisms, which is again accomplished through transparency and democratic approach providing firms and citizens with the opportunity of giving feedback. Another major approach is the distribution of power by avoiding the concentration of power in the hands of the management. Decisions have to be discussed in order for self-serving interests to be excluded from the acts of the administration. Position rotation is seen as a useful method for avoiding abuse of power. The teamwork, especially during interrogation is important in order to avoid any attempt of bribery.

NRA audience posted a lot of questions to the Swiss tax experts. The questions covered areas as what are the determinants for what tools of investigation (i.e. criminal investigation) should be be used by which administration and which cases, transfer pricing regime and fraud and evasion linked with transfer pricing, procedures for sharing of information between Swiss and Bulgarian tax administration at different stages of tax investigations.

In addition, the FTA experts had a separate meeting on 16th with the Executive Director of the National Revenue Agency of Bulgaria for a follow up discussion on future cooperation. A separate discussion was held with the head of the internal control directorate as an important element of the project capacity development section.

Mr. Emanuel Lauber, Head of the Division of Penal Affairs and Investigations, Switzerland
Mr. Dieter Krähenbühl, Deputy Team Leader of the Division of Penal Affairs and Investigations, Switzerland

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