​Approximately 70% of taxpayers interviewed during the EY tax audits survey in Romania complain about the large volume of documents requested by inspectors, and more than 57% believe that they are not analyzed with the necessary attention. This survey conducted by EY Romania included 75% of large taxpayers, 15% of medium and 10% of small taxpayers.

Fiscal control in Romania remains a relevant topic at all times. Announced or not, more or less often, with or without a specific topic, otherwise an absolutely necessary and mandatory procedure in any tax system, it remains “scary” for the taxpayer.

The reason is simple and depends on the premise from which the control authorities proceed when checking a Romanian taxpayer: it is impossible for all his documents, records, receipts and payments to be correct, therefore the collection of additional fees and taxes is inevitable.

Over time, Romanian taxpayers have encountered various situations, generally referred to as “procedural irregularities”, when they were audited by ANAF. From not approving the activities of the tax inspectorate to repeatedly suspending control and from not notifying about the delegation of authority to not providing a reasonable deadline for preparing the final discussion, everyone has faced one or another situation, or even several at the same time.

Under the current tax code, which has been in effect since January 1, 2016, such violations do not stop, although perhaps less often and in other forms, some of them are even surprising.

The purpose of the survey was to identify aspects of the tax inspectorate’s activities that create problems and dissatisfaction of taxpayers. In other words, what elements of the control act stress them and how tax authorities can raise the quality of tax debt control activities to a higher level.

The study revealed a number of vices, which, in addition, led to the erosion of the confidence of the Romanian taxpayer in the good faith of the inspectors who carry out control activities.

Bad faith on the part of the authorities. The fact that in almost 40% of the cases of taxpayer audits began in December, without the real intention of the auditors to actually carry out control activities. Practically, after the first visit, they returned only the following year, in January or even later, the only reason for starting the control was the failure to issue the right to establish tax requirements for a certain period.

Failure to comply with the warning period. In almost 20% of cases, this deadline was not met by the controlling authorities, which from the very beginning creates enmity between the auditors and the taxpayer, who, not having this deadline for preparation (collection of documents and information for control), is under pressure to quickly provide those documents and information required by inspectors.

About the fact that in almost 40% of cases, the inspectors did not present an identity card, an order on completion of service and/or an act of transfer of powers, and when presented – 43% – they did not allow the taxpayer to photocopy. them – it indicates mistrust and creates suspicion, affecting the relationship between the taxpayer and the inspector.

Another serious aspect revealed by the survey is that in 38% of cases taxpayers were not allowed to accompany external tax advisors and in 44% of cases they were not allowed to bring lawyers to discuss with the inspection team. The Tax Procedure Code directly provides for the taxpayer’s right to use specialized assistance, therefore, a deliberate violation of this right obviously affects the right to defense. Repeatedly, according to the answers to the questions in the survey, tax inspectors expressed themselves as unpleasantly surprised or even outraged by the taxpayer’s intention to come accompanied by third-party consultants or lawyers.

In 24% of cases, the audit team did not take into account the results of previous controls or inspections, and did not give reasons why they do not do this, although according to the Code, tax inspectors are obliged to take into account previous results, and in other cases, to give reasons why they do not do this sewing

In 75% of the audits, although it was a selective audit (not all transactions and documents of the taxpayer are audited), the auditors did not establish with the taxpayer a significance threshold for the analyzed transactions – for example, establishing that the audit to be performed for transactions exceeding a certain value . Thus, it complicates the verification and wastes time to research some aspects that may not be relevant.

The majority of taxpayers (almost 70% of those surveyed) complain about the volume of documents required by auditors, and it seems to them that they are still not considered with due attention (more than 57%). Obviously, there is no agreed upon procedure to determine which transactions to check, so it goes haphazardly, in all directions until something is found, any transaction requires a lot of paperwork, which is extremely burdensome and chronophagous.

The results of the survey also clearly reveal the problem of untranslated documents – in 74% of cases, inspectors did not accept documents in languages ​​other than Romanian. Indeed, the law (Fiscal Procedural Code) stipulates that the official language is Romanian, but the inspectors can agree, if they know the relevant foreign language, to first review the relevant documents, at least those aspects that are relevant to the subject of the audit, and if it is really necessary, the taxpayer must translate them. Otherwise, time is lost and money is spent on translating some documents or information, which, in the end, turn out to be irrelevant or, even worse, not even considered by the inspection team.

Other aspects obtained from the survey:

• In 37% of cases, taxpayers believe that the audit was unreasonably suspended by auditors
• In 24% of cases, the inspection was suspended for the inspectors to analyze the transfer pricing file, which is illegal because such analysis can only be done during the inspection.
• In 24% of cases, the review was suspended after the maximum review period had expired, which again is not legal, as suspension can only occur during the review, not after it has completed
• In 50% of cases, taxpayers reported that the audit was not renewed immediately, but after a certain period of time, which unreasonably lengthens the duration of the audit. In practice, the audit takes an extremely long time – although the maximum term is 180 days, 47% of taxpayers claim that the audit for them lasted 1-2 years, which affects their economic activity, as they must be constantly available to inspectors.

Another worrying point is that 25% of taxpayers indicate that during the suspension of the audit, the audit team asked them for documents and information, although this is prohibited by law.

In almost half of the cases (46%) national or European case law was not taken into account, usually with the motivation that the cases are not identical, and in more than half (52%) of the cases the final discussion was only a formality and a real dialogue with the control there was no group, but only her monologue – and then only when there is, because in many cases it is only about the fact that the taxpayer has already seen the conclusions of the control, because he had time to read the draft of the inspection report.

And last but not least: in 73% of cases, although the taxpayer provided his point of view, the conclusions set forth in the draft audit report remained unchanged. In other words, this time too it turns out that the point of view expressed by the taxpayer at the end of the control act is just a formality, useless, like the final discussion, because it is hardly taken into account.

“It is clear that something has to change radically in the control system in Romania, as the mentality and angle of approach to the taxpayer by the Romanian authorities, to which should be added a component of prevention, education and consultation, so that he knows, for the future, how to comply with the tax rules . Examples such as Germany, Great Britain, Scandinavian countries and also the USA, where the taxpayer is first informed about the audit and how to prepare, giving him enough time to be aware of absolutely everything when the inspectors arrive at their door, they should also be models to follow in Romania. However, this appears to have been the intention of the Romanian authorities, who recently launched into the public domain a draft amendment to the Fiscal Procedural Code containing such proposals. We look forward to their final appearance and, of course, their entry into force.”– said Alex Slujitoru, a lawyer at Bank, Deacon and Associates.

Article supported by EY Romania