WHILE the total number of tax audits performed in Slovakia has been declining over recent years, a higher number of so-called ‘findings’ indicate that better methods and instruments are being used by the country’s tax administration to root out tax fraud or tax errors. In 2006 there were more than 30,000 tax audits in Slovakia and the average amount of each finding was less than €10,000 in miscalculated or unpaid taxes. In 2010 the Tax Directorate performed only 18,400 tax audits but the average finding was €30,000, according to the Slovak branch of Ernst & Young (E&Y) which wrote a report earlier this year titled Tax Audits in the Slovak Republic, based on data released by Slovakia’s Tax Directorate.
Tax audits uncovered findings that totalled €556.3 million last year. Findings in VAT audits represented 76 percent of the total findings and accounted for €424.4 million in additional tax collected, the SITA newswire wrote.
According to Ernst and Young, 54 percent of the tax audits ended with a finding that assessed additional tax liability and a penalty for the taxpayer or in a decrease in a tax loss involving corporate income tax.
E&Y ascribes the growth in the amount collected from €290 million in 2006 to €556 million in 2010 in part to more frequent exchange of international information by Slovakia’s tax authorities. Through international information sharing, Slovakia is able to gather better information for proper assessment and payment of taxes by foreign companies, even those operating from so-called tax havens. International information requests increased most significantly in the area of indirect taxes such as VAT, which were tenfold higher than requests regarding direct taxes such as personal or corporate income tax.
Taxpayer compliance with VAT and corporate income tax requirements are of primary interest to tax auditors and preventing evasion of VAT payments is perceived as most important from the perspective of the public budget and that is why audits mainly focus on this area, E&Y wrote.
E&Y added that tax auditors have their highest success rate when auditing personal and corporate income tax payments and the firm recommends that taxpayers be fully prepared to provide sound arguments and have sufficient underlying documentation to substantiate their tax calculations.
