The fight against tax fraud: what action has been taken on the recommendations of the Senate’s fact-finding mission?

by | Mar 14, 2023 | Corporate taxation, Dispute resolution: litigation | 0 comments

In 2022, collections after tax audits reached 14.6 billion euros, i.e. 8.2% and 1.2 billion euros more than in 2021, according to the February 23, 2022 press release from the Ministry of the Economy and Finance.

An opportunity to take stock of the follow-up to the recommendations made by the information mission on the fight against tax fraud and evasion in its report of October 25, 2022.

Recommendations of the information mission on the fight against tax fraud

To improve the system for combating tax fraud, the fact-finding mission recommended :

  • Publish estimates of tax evasion each year;
  • Create a performance indicator on the proportion of checks scheduled thanks to datamining ;
  • Lifting professional secrecy for specialized assistants who help prosecutors with tax fraud cases;
  • Reduce the number of members of the Commission des infractions fiscales ;
  • Increase the number of judicial tax officers in the SEJF (Service d’Enquête Judiciaire des Finances);
  • Extend the jurisdiction of judicial tax officers to include VAT fraud and not just judicial customs officers;
  • Promote the automation of data exchanges between Customs and the General Directorate of Public Finances (DGFiP) for the recovery of import VAT;
  • Enable customs officials to automatically access information on travelers’ country of tax residence during the VAT zero-rating procedure;
  • Develop the procedure for suspending the intra-Community VAT number ;
  • Enable customs officials to directly sanction VAT fraud committed during import customs clearance;
  • Evaluate the effectiveness of the European one-stop shop for import VAT declarations (IOSS);
  • Amend the provisions of article 60 of the Customs Code relating to the right of inspection by Customs officers;
  • Prolong and extend the experiment enabling tax and customs officials to collect and use data accessible on online platforms;
  • Introduce prior authorization from the controller of connection data requests for the communication of connection data to Customs officers;
  • Reflect at international level on the creation of a “name and shame” system for countries that do not cooperate in exchanging information;
  • Enforce sanctions for failure to provide information in the register of beneficial owners;
  • Publish annual statistics on the application of these sanctions,
  • Develop a tool for cross-referencing data from the register of beneficial owners with other data, such as land registry data,
  • Evaluate the effectiveness of the transparency obligations introduced by the “DAC 6” directive for financial intermediaries;
  • Remind the government of the need to revise international tax treaties providing for a zero withholding tax rate on dividends.

What action has been taken on these recommendations?

Some of the recommendations made by the fact-finding mission on the fight against tax fraud and evasion were the subject of provisions in Finance Act no. 2022-1726 of December 30, 2022 for the year 2023, such as:

  • Extending the powers of judicial tax officers to VAT fraud (Article 84 of the Finance Act for 2023);
  • Article 88 of the Finance Act for 2023 amendsarticle L. 10 BA of the French Tax Code concerning the procedure for invalidating an intra-Community VAT number. Henceforth, where there is corroborating evidence that this number is used by an identified operator who knew or could not have been unaware of his involvement in a fraud aimed at avoiding the payment of tax due in France or the European Union, this number may be invalidated.

Conversely, other provisions included in this law were annulled as budgetary riders by the Constitutional Council’s decision no. 2022-847 DC of December 29, 2022:

  • Article 82 of the Act provides that the judicial authority shall communicate to the customs administration any information obtained in the course of legal proceedings that may give rise to a presumption of a customs offence or tax fraud;
  • Article 83 of the law aims to exempt from professional secrecy the specialized assistants made available to public prosecutors’ offices by the DGFiP ;
  • Article 98 empowers the Government to adopt by ordinance any measure within the scope of the law to amend article 60 of the Customs Code in order to specify the framework applicable to the conduct of inspection operations by Customs officers.

Not all the recommendations made by the fact-finding mission to combat tax fraud have yet been translated into law.

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