Employees of the State Revenue Service do not follow the institution’s guidelines, do not document criteria assessments in accordance with requirements of Latvian Code of Administrative Violations and generally apply fines based on their views, creating an unequal approach, BNN was told by the State Audit.

In its report, SA evaluated the practice of applying fines in the State Revenue Service. Throughout 2014-2016, SRS applied 52,000 fines for a total amount of EUR 12 million. It was concluded in the report that application of fines is inconsistent, deadlines are often missed, the calculation of fines is sometimes impossible to follow and only 53% of all applied fines have been collected over the years.

SRS and Finance Ministry should evaluate the reasons for violations and whether or not application of fines helps reduce the number of violations, SA emphasized in its report.

«The point of administrative punishments, including fines, is to motivate society to follow laws and prevent future violations. SRS can apply 105 different fines. In practice, however, 80% of fines are applied for non-cooperation with tax administration, accounting and declaration submission violations or failure to submit declaration in time,» notes SA.

The audit revealed differential actions performed by SRS in similar cases. Latvian Code of Administrative Violations details a very specific range of fines. SRS can pick a size of the fine based on different aspects. For this reason, SRS has developed guidelines for different situations. In addition, LCAV also states that it is important to follow specific criteria when applying a fine – detail the type of violation, the guilty party’s profile and their financial state, as well as any extenuating or aggravating circumstances. The audit showed, however, that SRS employees do not follow the institution’s guidelines, do not document criteria in accordance with LCAV and generally apply fines based on their own views.

«For example, in one case SRS only gave a verbal warning for not submitting a declaration on time. In another case regarding failure to submit a declaration on time, a person was fined EUR 280. Two different fines were applied for not cooperating with tax administration – EUR 20 in one case and EUR 450 in another. Because the reasons for applying different fines were not recorded, neither SRS nor the individuals fined know why one or the other amount was applied. SRS employees interviewed during the audit could not explain why such an unequal approach is present in the practice of applying fines,» BNN was informed by State Audit.

SA experts also recorded cases when taxpayers were not punished at all for violations. For example, more than 200,000 declarations were submitted late throughout 2014-2016. Fines, on the other hand were applied only 7,510 times. Finance Ministry informed SA that a proposal has been developed in cooperation with SRS so that decisions regarding application of fines are automatically sent through Electronic Declaration System if a person submits a declaration past a set date.

«The number of violations for which fines are applied on a regular basis will only increase in the future. On top of that, those are often the same people. Fines alone can’t help prevent new violations from surfacing. One of the reasons is that many of them are committed unintentionally. In State Audit’s opinion, SRS does not analyze reasons of violations sufficiently. Without understanding the reasons for violations, it is not possible to come up with preventive measures, including education of society and ‘consult first’ principle,» SA states.

Ref: 224.109.109.6129