Fight against tax fraud: what results in 2021?
Free translation – for information purposes only
After a health crisis year in 2020, the tax authority has released its 2021 business report in which it presents its annual results.
This is an opportunity to note a clear rebound in the activity of the Public Finance Department (DGFiP) in the fight against tax fraud.
Tax audits on the rise in 2021
In 2021, the DGFiP has decided to focus its controls on asset fraud for individuals and VAT fraud for professionals.
Thus, according to the data in the 2021 Statistical Report(https://www.economie.gouv.fr/files/files/directions_services/dgfip/Rapport/2021/ra_cahier_stat_2021.pdf?v=1655801983): 112,759 documentary checks on professionals were carried out in 2021, compared with 104,586 in 2020.
Documentary audits of VAT credit refund claims have even exceeded pre-crisis levels with 135,535 audits performed in 2021, compared to 125,076 in 2020 and 132,723 in 2019.
The tax administration also made 2,561 on-the-spot instructions of VAT credit claims, more than double the 1,255 instructions made in 2020.
The volume of transfer pricing adjustments also remains high. According to the cross-cutting policy document(https://www.budget.gouv.fr/documentation/file-download/14359) on the fight against tax evasion and fraud of the Ministry of the Economy, Finance and Recovery, this mechanism was used 203 times in 2020 and 355 times in 2019, for amounts adjusted of 1.2 billion euros in 2020 and 3.899 billion euros in 2019.
The means to fight tax fraud effectively
To improve its results in the fight against tax fraud, the DGFiP has strengthened its cooperation with the judiciary, in particular with the National Financial Prosecutor’s Office (PNF), and modernized its techniques for analyzing mass data with data mining.
The tax administration’s cooperation with the judiciary is illustrated by the increase in the number of fraud cases referred to the judicial authority. In 2021, 4,168 cases were referred to the judicial authority, compared to 1,489 in 2020 and 1,826 in 2019.
This explosion in the transmission of files to the justice system is explained by the large number of complaints for fraud against the solidarity fund: 2,542 complaints, but also by the application of Law No. 2018-898 strengthening the fight against fraud of 2018 and which relaxes the “Bercy lock”. Indeed, since 2019, tax files that reach a certain amount are automatically sent to justice. In 2021, the tax authorities thus had to transmit to the Public Prosecutor’s Office 1,217 tax reassessment files, compared to 823 in 2020 and 965 in 2019.
The development of data mining, as part of the Targeting Fraud and Valuing Requests (CFVR) project, has enabled the tax authorities to cross-reference and analyze the numerous data they hold, to detect simple anomalies, to better target their controls and to automate certain requests.
Thus, while in 2020, 32.49% of tax audits were conducted using artificial intelligence techniques, in 2021, 44.85% of audits were initiated after mass data analysis, and the DGFiP has set a target of 50% for 2022.
The good results for 2021 in the fight against tax fraud are therefore the result not only of the improved health and economic situation, which has allowed the tax authorities to resume their activities, but also of several ongoing developments, such as the use of data mining and the cooperation of the tax authorities with other authorities.
Contact the author – Cyril Maucour – Tax Lawyer – AlterTax Avocats
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