National Audit Office of the Republic of Lithuania

Press Release


17/09/2019

The importance of the smart tax administration is evident, but its potential is not yet exploited

In order to implement business monitoring through smart ways when provision of services is taking place in real time, to improve tax administration, and to tackle the shadow economy more effectively, Lithuania, like the rest of the European Union countries, has launched a smart tax administration initiative. In Lithuania, the implementation of the project on the system of smart tax administration (i.MAS) started in 2014 and is planned to be completed in 2021.
 
The National Audit Office carried out an audit “Smart Tax Administration System“, assessing whether the solutions developed and to be developed will ensure that the objectives of the i.MAS are achieved. It was detected that the importance of the smart tax administration is evident, but because of the shortcomings in its implementation, the objectives of the i.MAS project could not be achieved in full.

“New technologies and data analytics provide opportunities to improve the tax administration, while models developed and operated allow the identification of risky business segments, however the potential of data analytics is not exploited at national level in the fight against the shadow economy,” says Asta Riukienė, Chief Adviser of the Governance Audit Department at the National Audit Office.

According to the data of the State Tax Inspectorate which is implementing the i.MAS initiative, in 2017-2018 as a result of the realised i.MAS subsystems, and having carried out the monitoring and control, an extra 11 million EUR of VAT was declared. The audit results show that there is no system in place for measuring the socio-economic benefits of the project to the State, and the impact of the project on the shadow economy and the collection of tax revenues is not known yet. In Lithuania, the size of the shadow economy is one of the largest in Europe and stands at 23.9 % of GDP.

I.MAS e-services had to balance the need to control taxpayers and reduce the tax administration burden. The audit found that the administrative burden for business has not yet been reduced — the actual cost of reporting the taxpayers’ annual data amounts to EUR 18 million and is higher than planned, while the generated e-services are not always in line with the needs of consumers, as taxpayers perceive part of them as not useful, and do not fully use them. I.MAS collects detailed information on the activities of the business operators and, while there is a system in place for ensuring the safety of taxpayers’ data, not all controls are sufficiently effective. 

In order to contribute to the reduction of the shadow economy at national level and to improve the process of tax administration, the Supreme Audit Institution recommends the assessment of alternatives to the follow-up activities of the State Tax Inspectorate’s Data Analysis and Competence Centre’s and to decide on its operating model at national level. The implementation of the other recommendations of this audit will reduce the administrative burden for business regarding the data provision on the underlying transactions and reinforce the control measures to ensure the safety of taxpayers’ data.

 

National Audit Office of the Republic of Lithuania
Pamėnkalnio str. 27, LT-01113 Vilnius
www.vkontrole.lt