The tax administration has been using software to automate the processing of taxpayer data and accelerate tax audit procedures. (source: Vecteezy)
Last year, eight in 10 tax audits ended with a penalty and an additional tax assessment. Yet despite the rising efficiency of the Financial Administration, the state collected nearly €100 million less through this channel compared to the previous year. The administration focused primarily on value-added tax (VAT), where it recorded the highest number of findings. The number of income tax audits remains low – something Silvia Hallová of advisory firm Grant Thornton sees as a missed opportunity for the state to secure significant revenue.
“Although auditors are achieving high levels of efficiency, if more focus were placed on income tax audits, the state could recover more funds,” said Hallová, partner at Grant Thornton. “This area has long been neglected, and as a result, the state is losing out on a substantial share of tax revenue.”
While in 2021, VAT accounted for 61 percent of all tax audits, the share rose to nearly 69 percent in 2023 and slightly decreased to just over 67 percent in 2024.
In 2023, most audit findings were registered in the area of corporate income tax. However, in 2024, VAT took the lead. Findings from VAT audits, including additional tax and penalties, accounted for 52.7 percent of all audit outcomes last year, compared to 44.1 percent in the area of corporate income tax. Overall, 80 percent of tax audits uncovered irregularities, resulting in sanctions, a figure that has increased once again. However, this improved efficiency did not translate into higher revenue: the total amount of additional tax and penalties fell year-on-year by €97.8 million, Grant Thornton cited the Financial Administration’s 2024 annual report.
Transfer pricing targeted, too
Tax auditors remain active in the area of transfer pricing, focusing primarily on domestic firms, which were the subject of three-quarters of such audits. However, when it comes to issued penalties, the situation is reversed: the overwhelming majority of fines were imposed on Slovak subsidiaries of foreign multinational groups. Of the total €71.73 million in additional tax from transfer pricing audits, €68.95 million, or 96 percent, was attributed to these subsidiaries.
Although the number of transfer pricing audits rose from 95 to 103 year-on-year, the amount of tax assessed dropped significantly. In 2023, auditors levied €112.6 million, while in 2024, the figure dropped to €71.73 million.
The Financial Administration’s data shows clear signs of growing professionalisation. While the overall number of audits remains low compared to 2019-2021 levels, there was a slight year-on-year increase in 2024. The efficiency of audits continues to improve, reaching 81 percent last year, meaning that four out of five audits concluded with findings and additional assessments.
Data tools and staffing constraints
As the Accounting Act mandates that legal entities must keep their books in electronic form, the tax administration has long used IDEA software to automate the processing of taxpayer data and accelerate audit procedures. The software analyses accounting data.
“In the area of data evaluation and analysis, the Financial Administration has made substantial progress in recent years,” noted Hallová. “Work with risk indicators – based on which tax offices target companies and measures showing discrepancies– has significantly improved compared to the past.”
The persistently low number of audits in recent years suggests that tax offices are grappling with staffing shortages. This is also reflected in the data: the Financial Administration’s headcount fell by 124 in 2024 compared to 2023, noted Grant Thornton.
