How to slow down the VAT embezzlement

“It is not known in Lithuania what damage the VAT plunderers cause to the State Budget. However, in various estimations it may amount from LTL 0.5 bn to LTL 1 bn. Measures to combat such activities employed by the State Tax Inspectorate (STI) and Financial Crime Investigation Service (FCIS) are not efficient enough“, states the Auditor General Rasa Budbergytë summarizing public audit report Measures Employed by Public Institutions to Combat the VAT Evasion and Fraud.

It was detected during the audit that legislation does not prevent the  establishment  and  existing  of bogus entities, while control

and law enforcement institutions do not possess enough information for prevention and control of criminal acts of these entities.

There are no joint measures for combating the VAT evasion and fraud at the State level, no planned objectives nor goals oriented to concrete restitution of damage to the State. Currently no institution is responsible for drawing up and storing the statistics on VAT tax damage to the State caused by financial crimes and restituted, as well as for analysing changes and trends.

In the view of the National Audit Office, control measures employed by the STI to combat the VAT evasion and fraud are insufficient.

Examples presented in the audit report show that due to procedures stipulated in regulations of cooperation between the STI and FCIS, beginning of criminal procedure is not expeditious and efficient investigation of criminal acts is not ensured. Therefore the State is not able to recover a large part of damage done to it.

In the opinion of the National Audit office, the impact of measures employed by FCIS to combat VAT evasion and fraud on protection of the State finance system, evaluation of damage to the State and its repair is not sufficient.

Recommendations were given to the Government, Ministries of Finance and the Interior, State Tax Inspectorate and Financial Crime Investigation Service, implementation of which would ensure larger repair of damage done to the State.


Full report is available in Lithuanian: Measures Employed by Public Institutions to Combat the VAT Evasion and Fraud