I recently read information from the Polish Tax Service (KAS) that its agents buy products and services incognito from boutiques, department stores, canteens, hotels, restaurants, SPAs, etc., to check if the sale is registered to the house and if I file correctly tax receipts. After 32,000 checks, one in four purchases were found to be in violation. When you think that this is happening in Poland, which is, isn’t it, a recognized performer in reducing VAT evasion, it’s as if you automatically say to yourself – it’s clear that we should be more Catholic like them, if we can every day, to our Fiscal gave us a report on how many inspections, anonymously or publicly, he conducted, what fines he imposed, etc.

I continue to read from the information of the Poles: “this type of control is sometimes associated with unpleasant situations, resistance from the controlled. That is why at KAS we take care of the professional development of our employees, we even offer them psychological help, and in crisis situations they benefit from the quick intervention of officers in uniform“.

It’s easy to understand that such control comes at a high price, especially in times like the ones we celebrate. It is obvious that the tax receipt is the area where there is no debate, here flexibility should be maximum [1]. But tax compliance means much more than providing receipts. And not only with the help of audits, you guarantee compliance with tax legislation by your taxpayer. If you are a strong administration, you already know that you need to level up … The Dutch: The tax from the land of tulips has been cultivating the concept for many years “flexible where possible, strict where necessary“. And they grow it successfully, if you look at the results they have [2].

You would say that we should be the first to adopt this new production system which will help us to increase our tax compliance intensively. But…the next episode speaks for itself! After last-minute changes to the Fiscal Procedural Code, “the taxpayer/taxpayer who submits the request is not entitled to a refund of the fee paid for the issuance of the estimated individual tax ruling (ITR), if the application undergoes a substantive review procedure with the aim of resolving it by issuing an order of the Minister of Finance approving/rejecting the request for issuance DFIA“. Until last month, the same taxpayer-applicant knew that he had “the right to a refund of the tax paid in the event of a refusal by the competent fiscal authority to issue an SFIA“. [3]

What is an individual tax ruling? “Administrative act issued by the central fiscal authority to resolve the request of the taxpayer/taxpayer regarding the settlement of the future tax situation“. The key word here regulation. In translation, the person/firm/investor/taxpayer wants to be sure that he has a good understanding of the situation/transaction before putting it into practice: he wants to pay taxes to the government as much as he owes, and based on the interpretation that this case, he will agree with the tax service, he wants not to be bothered with questions later but that’s why it’s so and so on.

“These interpretation rulings (advance tax rulings) occur all over the world and have developed as a result of a change in mentality at the level of tax authorities; is an indispensable tool in achieving the highest possible level of compliance with tax legislation by establishing the necessary reciprocity between the authority and the taxpayer“. I quoted a 2015 analysis presented to the European Parliament which is below:Politicians must be careful with this precious tool, which absolutely must not disappear“.

To us, the tool seems quite expensive, with an issue price of 3,000-5,000 euros! (5) But one cannot help but wonder: how does care manifest itself so that it does not disappear?

Since “in 2021, 13 anticipated individual fiscal decisions have been approved and 35 are in the process of being resolved,” the report on ANAF’s activities for the past year says.

With such a volume of activity, it could be expected that the Ministry of Finance, which this year directly took over the management of the DFIA, would come with a specific message – we want/don’t want more, if we do, how we do it, etc.

The Ministry’s intentions and aspirations in this regard are not at all clear in the draft Order on approval of the procedure for issuing DIFA. Now a list of situations from a) to y) is proposed, in which the issue of the SFIA is rejected (according to the current procedure, the list is only from a to h). It’s not exactly an extension that would be a problem if it added more clarity! But we are still in the rejection zone the payer repeatedly provided information unrelated to the issueunder conditions in which, obviously, the relevance of the information is established by the competent fiscal authority. Or – rejection, if it is found that the request does not cover the issues that need to be clarified, or a new situation, if there is no reasonable alternative to applying the tax regime for the proposed transactions.

fine, but what is the reasonable interpretation? – this is what the taxpayer wants to know! To do this, he concludes this transparency agreement with the state. Put documents from the back kitchen, including from his group of companies, on the treasury table. He assumes that the tax settlement, if he receives one, “has legal force and is binding on the fiscal authority only if its terms are complied with by the taxpayer“. He also suggests that “the information provided must be correct“. And as the new project of the Order sounds, it must also do introspection, even self-criticism, to show that it has no ulterior motives. [4] Finally, he suggests that he needs to pay €5,000 for the issuance of the SFIA for this whole operation. Now, after the amendments to the Tax Procedure Code, he must assume that this tax will still be lost. How to say – if he does not receive the DIFC, then he is left with the seized money, and with… the prospect of a difficult inspection.

I return again to the European report quoted above – “The taxpayer should be treated as a customer. He deserves a high-quality service if he voluntarily provides information about tax risk situations (a kind of self-analysis of risks) and gives comprehensive answers to the tax authority. In this relationship, the tax authority must understand the taxpayer’s business and tax strategy, act correctly and not focus primarily on immediate profit.“.

Practically speaking, by building real cooperation relations (horizontal monitoring), you get a functional alternative to expensive inspections, fiscal control (vertical monitoring). In the known Romanian equivalent – you will lose more if you buy bran!

For example, the inspection report contains several service lines – “Regarding the tax audits carried out on taxpayers who carried out transactions with affiliated persons, during which the applied transfer prices were also checked, a difference in the tax base in the amount of 584.1 million lei was established. Thus, the additional difference in the tax base is determined: additional income tax payment of 43.3 million lei; reduction of the fiscal loss: 352.6 million lei“. (ANAF, report on activities in the first semester of 2022). What message can such lines carry? Some amounts, somewhere at the level of last year and … everything! But at what cost were these checks carried out both for the taxpayer and for the administration? Did they really change taxpayer behavior? Did they help you, the administration, get to know and approach your taxpayer better?

Instead, the message becomes much stronger when you read that “for January-June 2022, two advance price agreements (APAs) were concluded and three applications to open a settlement procedure were resolved“.

As the equivalent of the SFIA, but on the highly complex issue of intra-group transactions (as regards the setting of appropriate transfer prices), these APAs are also an indication of the administration’s openness to cooperation. As you can see, this cooperation is expensive. And where to invest that the fee for an APA analysis reaches 20,000 euros!

How to convince/help/motivate the taxpayer to come to me, not me to him! – this should be a question that does not give rest to the state, at least during all eight hours of the program. Would it help more if we abolished these tax rulings, as we did in Holland? (From the principle who needs a fee if I’m still getting valuable information!) Can we not borrow something from the Polish system, where individual fiscal decisions have become a kind of national sport, encouraged, even subsidized by the state? There, if you want to have confirmation that you are applying the law correctly (including in transactions already made!), if you are a shareholder or a potential investor… the government is really interested in helping you clarify your tax concerns! It even provides you with a database of solutions that can help you (6). Is it better to use the money from the SFIA/APA tax to pay our professionals better, they will be more motivated, they will provide other solutions faster, ultimately there will be more beneficiaries, thus the fiscal system will be more predictable? Focus on a broad program of guidance with general interpretations of the tax regime in all conflicting areas? Read the whole article and comment on Contributors.ro