Costly tardiness

The Economy Ministry’s most recent findings from cross-checking the lists of clients and suppliers submitted by small businessmen and professionals have come as no surprise. But that does not mean they are no cause for concern. The inspection showed that many businesses neither pay taxes nor their dues to IKA, the main social security fund. Delays in utilizing the electronic cross-checking system and the technical snafus that hit the Taxis system opened a loophole through which wrongdoers were able to sidestep their obligations. Many businessmen exploited the imperfections of the computer-based monitoring system and got away with not paying the taxes for salary based services that they had withheld. On top of the usual instances of tax evasion, such as failure to issue receipts for retail sales, there are also cases of evading tax on funds withheld by third parties. The Economy Ministry is currently examining the findings of the latest investigation in order to track down all cases of embezzlement of tax withheld and to trace bogus invoices. Electronic cross-checking makes a huge difference, and the state now requires that small businessmen and professionals submit the necessary data electronically so that information is not lost in the mountains of folders piling up in tax offices around the country. It goes without saying that the transition to electronic declarations must be carried out in a smooth fashion and the process be simplified (many suspect cases are actually the result of common errors such as taking receipts instead of invoices). In any event, computerized cross-checking can spare the state a great deal of trouble and curb illegal deals between tax inspectors and business people. The delays in modernizing the monitoring system fueled overt tax avoidance and resulted in lost revenues. This was money badly needed by the public sector and IKA which could have been collected; otherwise there would be less need for indirect taxation, and people’s tax conscience would be stronger. The price of state tardiness was once again high.

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