eTax crashes, no reprieve for taxpayers

DESPITE encouraging taxpayers to file their income tax returns online this year, come late March Slovakia’s tax authority was forcing even determined computer geeks to submit their returns by the traditional pen-and-paper method. The Slovak Tax Directorate’s online service for submitting tax returns collapsed just as the March 31 deadline for submissions approached. The web portal, which had cost €3 million to design and was supposed to make the lives of taxpayers easier, proved unable to handle the high number of attempted uploads.

DESPITE encouraging taxpayers to file their income tax returns online this year, come late March Slovakia’s tax authority was forcing even determined computer geeks to submit their returns by the traditional pen-and-paper method. The Slovak Tax Directorate’s online service for submitting tax returns collapsed just as the March 31 deadline for submissions approached. The web portal, which had cost €3 million to design and was supposed to make the lives of taxpayers easier, proved unable to handle the high number of attempted uploads.

The tax authority's response was swift and merciless: it announced that the frailty of its eTax portal would not be accepted as an excuse for failure to submit tax returns by midnight on March 31, and that its own site’s technical failings would not be grounds for exemption from late-filing fines ranging from €33.19 to €16,000. The portal now seems set to cause further serious problems for both the software supplier and the tax authority.

The financial damage resulting from the failure has reached several thousand euros and the authority is still working out the full consequences, Slovak Tax Directorate spokesman Miroslav Dobák told The Slovak Spectator.

The tax office is now suing Novitech Tax, the supplier of the software. However, Novitech CEO Peter Birčák said that his firm had previously warned about the “unsustainable condition of the tax administration’s portal,” reported the Sme daily. The Tax Directorate has responded that it was not authorised to tamper with the Novitech’s system.

Director General of the Tax Directorate Igor Šulaj has said he will not resign over the failure, stating that that his institution was only a user of the system and that the software it bought should have been functional. The tax authority asked the audit firm KPMG to carry out an independent analysis, which it included as part of its lawsuit against the supplier of the application, Dobák said.

Marek Wilhalm of KPMG Slovensko confirmed that his company signed a contract with the tax authority to investigate and identify the possible causes of the unsatisfactory state of eTax. KPMG remained tightlipped about the results, with Wilhalm stating “the stands of the Tax Directorate of Slovakia in reference to statements by KPMG are an interpretation of the Tax Directorate and considering the existing contractual relationship we would not comment on these”.

Now the tax authority is also trying to obtain the source code to the application, which Dobák said would allow it wider scope to take action in the event of future problems. Novitech Tax has been providing software for the tax information system, including its eTax internet portal, since 1992.

“At the time when the request to develop the portal was submitted six years ago, the tax administration had 774,000 registered taxpayers whom the portal was intended to serve,” Dobák told The Slovak Spectator. However, at the end of March 2010 it did not even work for the 27,000 registered users, who represented only 3.62 percent of the system’s planned performance in 2004, according to a Tax Directorate release.

The total price of the software solution for the portal was approximately €3 million, but Dobák said the contract lacked a protective element – the possibility to obtain the source code.

“The tax administration thus does not have the possibility to enter the system, test it and, among other things, make predictions,” Dobák told The Slovak Spectator. “Under normal circumstances these activities are within the purview of the supplier, but in case of obvious failures the user or an authorised person must have the possibility to assess the work, especially in cases where the user is supposed to carry public responsibility for its functionality.”

Birčák of Novitech told Sme that he and Šulaj had agreed to meet and discuss what should be done next for the system but that Šulaj had instead called a press conference to offer his version of the story, which Birčák called misleading.

The tax authority also claims that back in 2005, under the administration of Šulaj’s predecessor Mária Machová, below-standard work was accepted. It says this became clear only recently, as the number of daily users has grown several-fold.

Machová, also quoted by Sme, said that the original eTax project was good but that it had not been completed and that the current administration should have done so. Machová claims, according to Sme, that the new administration neglected the problem.

“From the contract itself and the acceptance protocol it was not clear that it was a partial work, intended only for a fragment of the then-predicted taxpayers, which logically should have been a substantial part of the agreement, with a significant impact on the price,” Dobák said.

Dobák said the problem was not a failure in the further development of the system but stemmed from complicated correction of previous mistakes and a lack of transparency about how much work had been done in relation to the price charged.

“We are also pointing at the fact that €48 million was spent on the whole tax information system, of which the portal is a part. This is not a small sum for the functioning of the system,” said Dobák. However, Sme reported that the tax portal was already failing in January when firms tried to submit their VAT returns online.

Under Slovak legislation every taxpayer whose income for the previous year exceeded €2,012.85 must submit an income tax return. As of April 6, the authorities had received 920,472 tax returns, which is 81.5 percent of the estimated number, the TASR newswire reported. Only 1,106 taxpayers managed to submit their tax returns electronically.

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