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Software chaos hits tax administration

SLOVAKIA’S new Financial Administration, which merged the work of separate tax and customs administrations at the beginning of 2012, has been sent into chaos by a malfunctioning information system, sending administration employees back to using paper forms and handheld calculators. Finance Minister Ivan Mikloš responded by sacking Igor Krnáč, the head of the Financial Administration, after less than two months in that post based on what the minister called a failure to properly perform his tasks related to installation of new software, called KONS, that was supposed to be fully functional as of February 1.

SLOVAKIA’S new Financial Administration, which merged the work of separate tax and customs administrations at the beginning of 2012, has been sent into chaos by a malfunctioning information system, sending administration employees back to using paper forms and handheld calculators.
Finance Minister Ivan Mikloš responded by sacking Igor Krnáč, the head of the Financial Administration, after less than two months in that post based on what the minister called a failure to properly perform his tasks related to installation of new software, called KONS, that was supposed to be fully functional as of February 1.

Mikloš’s chair as finance minister was wobbling too as the chairman of the opposition Smer party called for Slovak President Ivan Gašparovič to sack the minister, stating that tax administration in Slovakia had returned to the Stone Age. But the president said on February 22 that he would not remove Mikloš because “changing a minister only a couple of days before the elections is not an entirely good idea”.

Mikloš has given Mária Machová, the current director of the customs part of the Financial Administration, temporary management responsibilities for the entire office. Machová reportedly told Mikloš that her first step would be to end the career of Miroslav Mikulčík as the head of what is called the Financial Operations Competence Centre. The minister reportedly did not object even though he had backed Mikulčík in a controversy over an office rental deal last April that led to Mikulčík’s resignation as head of the Tax Directorate.

The IT system for tax administration was originally developed under a €5.8-million contract with Novitech, a Košice-based software firm, but that contract was terminated this January by Mikulčík, who had been put in charge of implementing the ministry’s UNITAS project to unify collection of income tax, payroll levies and customs fees.

KONS was supposed to replace the Novitech software. It was reportedly prepared by several firms, one of which, Bank Pro Soft, is reported by the Sme daily to have links to Mikulčík. He denies having any business connection to Bank Pro Soft.

Slovak media reported on February 22 that Krnáč wanted to address the problems that were surfacing within the Financial Administration in handling income taxes and customs duties by switching back to the Novitech-installed software system and that he had addressed a letter to Mikloš about the seriousness of the situation on February 18, two days before he was sacked.

Who is responsible?

Novitech stated on its website that it had warned Mikloš about possible complications in such a switchover last November and published a letter it had sent to the minister.

“Are those who significantly contributed to the emerged situation by their lack of cooperation now arguing that they had warned that such situation could occur?” Mikloš asked on public-service Slovak Radio on February 21.

Mikloš said that a failure to properly handle the software switch by responsible staff in the Financial Administration was one of the problems but added that Novitech had been unwilling to cooperate in interlinking the old and the new software systems, the SITA newswire reported.

Firm defends itself

Novitech stated that last fall an amendment to its contract was prepared that included the development of what it called IS RDS, a new centralised information system, as well as migration and integration of this system to the new KONS software system but that Mikulčík, who at that time was serving as an advisor to Mikloš, “stopped everything for incomprehensible reasons” and the amendment was not signed.

The Finance Ministry said it would resolve the critical situation in handling tax and customs data by summoning the entire committee handling the UNITAS project and by creating a working group to address the problems.

Mikloš said on February 20 that he expects the new information system to start working properly by the end of the week.

Smer calls for Mikloš to go

Smer leader Robert Fico told the media that by sacking Krnáč, Mikloš had confirmed that the information system being used by the Financial Administration was dysfunctional and that the country’s tax offices were now functioning in what he called a “Stone Age mode”.

“Ivan Mikloš, who is politically responsible for the administration that manages taxes, has failed both politically and professionally and he cannot cowardly escape his responsibility by penalising a low-ranking bureaucrat,” Fico stated on February 20.

Switching hats

Mikulčík was head of Slovakia’s Tax Directorate when it was a separate agency but resigned last April after the prime minister objected to a lease that he had approved in early 2011 to rent premises for the Košice tax office from Nitra Invest, a firm owned by Ondrej Ščurka, a district official of the Slovak Democratic and Christian Union (SDKÚ) party.

Krnáč replaced Mikulčík as head of the Tax Directorate last May and was then named head of the Financial Administration when it became operational in January this year.

The leasing deal caused considerable controversy within the SDKÚ and its coalition partners in government and the contract was eventually cancelled.

Nevertheless, the Tax Directorate signed a €6.3-million rental agreement with Nitra Invest just a few months later, on August 22, even though the firm was the only bidder in a re-issued tender that was criticised as unfair by Transparency International Slovensko (TIS) and Fair-Play Alliance, two watchdog NGOs.

Shortly after Mikulčík resigned as head of the Tax Directorate, Mikloš hired him, on May 2, as a personal adviser and he was subsequently named head of the Financial Operations Competence Centre early in 2012.

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