compliance audit report audit of performance of associated system of tax and customs facilities



Published: 04.11.2016 in Official Gazette No. 379-386 art no: 34 the Court of Auditors, in the presence of Deputy Minister for finance, Mrs. Valentin Vragaleva; the head of the main State Tax Inspectorate, Mr. Sergey Pușcuța; Deputy Director-general of the customs service, Mr. Gregory Ionițov; Head of Department policies on attracting investments from the Directorate of investment and competitiveness policy of the Ministry of Economy, Mr. Rigon, and others with reference to liability, being guided by article 2 para. (1) and article 4 para. (1) (a). a) of the law on the Court of Auditors No. 261-XVI from 05.12.20081, the auditor examined the conformity of the performance audit associate of tax and customs facilities.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1 Law Court of Auditors No. 261-XVI of 05.12.2008 (hereinafter law No 261-XVI of 05.12.2008).

The Mission of the audit has been carried out in accordance with article 28 and article 31 of law No. 261-XVI of 05.12.2008 and in accordance with the audit activity of the Court of Auditors for the year 20162. The audit was planned and conducted in accordance with International Audit Standards, applied by the Court of Conturi3 (ISSAI 100, 300, and 400 ISSAI ISSAI), and good practices in the field of public audit.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2 decision of the Court of Auditors No. 46 of 14.12.2015 "about approving the audit activity of the Court of Auditors for the year 2016".
3 the decision of the Court of Auditors No. 60 of 11.12.2013 "on the application of international standards of Supreme Audit institutions in auditing level 3-ISSAI 100, 200, 300 ISSAI ISSAI, ISSAI 400 audit missions within the Court of Auditors '; The decision of the Court of Auditors No. 7 of 10.03.2014 "With regard to the application of the guidelines on auditing (ISSAI 1000-9999) within the public audit".

Audit objectives and scope of the external audit activity consisted in assessing the administration of some types of tax and customs facilities, in order to determine the major issues, and the mechanisms put in place for the approval, implementation, reporting and monitoring of their impact are functional.
Examining the audit report presented, as well as explanations of persons with responsibility functions present in the public tender, the Court of Auditors found: tax and customs facilities are defined as a derogation from the normal tax structure, that lower budget revenues and have a significant impact on State finances. The amount of the tax and customs incentives granted by the State for the years 2011-2015 (those quantified and reported by Admins) is equivalent to approximately 57.4 URmlrd.lei.
Only for year 2015 amount is approximately 14.7 URmlrd.lei, 48.0% of expenses over the State budget executed in the same year (30.1 URmlrd.lei), being the highest level over the past five years.
Also, in the context of the value and significance of the impact of tax and customs facilities on the national public budget revenues, the audit noted that about 50 types of tax and customs facilities are applied consistently for a period of more than 19 years, without being modified, revisions or adjustments.
At the same time, as share in the gross domestic product, tax and customs facilities constitute 12.1% and 37.1% in the national public budget, and the State budget and the budgets of administrative-territorial units-about 50.9%. 
Tax and customs facilities, mainly the audit have been assessed from the standpoint of accountability: what information on the facilities serve as the basis for decision-making in the budgetary-fiscal policy; What information are available on the value of facilities managed by some responsible for this process; costs and impacts, as well as how they are reported.
In the light of the results of the audit activities undertaken, it reveals that the fiscal facilities, which in fact represents the unpaid revenues at the budget to be used by beneficiaries for the purposes that have been approved as part of the financial management system of the State, does not ensure an appropriate way of governance in accordance with their economic significance.
Moreover, the quality of the planning process and the final amount of tax and customs facilities is affected by the fact that no procedures and lack of responsibilities of this step, for each public authority legally involved in this process in accordance with the legal provisions.
Continuous increase in the volume of tax and customs facilities in the last five years is due to the enlargement of the facilities granted to spectrum, which, by the end of 2015, amounted to 105 types of exemptions from duties and taxes. Thus, in recent years the number of facilities has increased, and it was conducted and the tendency to increase the total volume of them. Evolution itself is in contradiction with the presence and evolutionary growth of the budget deficit and the Government debt more, diversify facilities applied makes the raising of other taxation.
The audit also confirmed that institutions are empowered with the right of administration of tax and customs facilities does not monitor the performance of the process according to the facilities in question, and the functionality of the controls is limited by the failure to apply in full measure all the legal instruments at their disposal.
On the other hand, the data reported by the Ministry of Finance concerning the volume of tax and customs facilities do not cover include all facilities/used by beneficiaries. In addition, not all values are quantified, and the correctness and completeness of the reporting process are affected, interested parties has offered them complete and reliable data regarding the size of the used amount/facilities. Thus, full reporting by the ignorance of the Ministry of Finance tax and customs facilities constitute URmil.lei about 5762.8 less than Customs and tax data, by which fact does not ensure the truthfulness and completeness of the data submitted to Parliament and the public concerning the actual costs of facilities granted.
A more real and more conclusive of the current situation with regard to the facilities in question could be obtained by making an inventory, with the codification of each type of facility and the elaboration of a new reporting format.
Given the fact that tax and customs facilities have a significant impact on State revenues, there is still no plans for monitoring and implementation of the objectives of the proper facilities established at the date of approval of them. No central authority does not exhaustively the determined economic impact assessment of tax and customs facilities.  At the same time, the Ministry of finance, which is responsible for the monitoring of the tax and customs facilities, has not provided analyses of the impact of the grant of the respective facilities/outcome, but was limited to generalization and systematization of information on the level of their costs.
In the same vein, it shows that: (i) the measures applied by the customs service does not provide totally monitoring goods that fall under the favourable tariff treatment through the use of tax and customs facilities for the importation of goods according to their final destination;
(ii) normative legal framework-carențele concerning the classification of long-term tangible assets, intended for inclusion in the capital have caused the importation and entry into the capital of various goods which do not fulfil the criteria for application: manufacturing of products, provision of services and/or the execution of the work;
(iii) an increase in the network of duty-free shops, through their location before passports control in the area of entry into the territory of the Republic of Moldova, opening them in areas temporarily uncontrolled constitutional authorities as well as the opening of a duty-free shop between the right bank of the Dniester River and the left bank have resulted in the increase of the tax and customs facilities from 244.6 URmil.lei 2011 904.2 URmil.lei till 2015;
(iv) exempting traders from eastern districts of the Republic of Moldova for the payment of any import duties in 2015 summed up 1606.0 URmil.lei, at the same time not being shrunk/excluded risk that the goods in question will not be reintroduced into the territory of the Republic of Moldova;
(v) the absence of tools for identifying the correct and full stock, beneficiaries of tax facilities, as well as their volume of conditional failure by the State tax service of the fiscal facilities granted to financial services in the amount of 2192.2 URmil.lei in the year 2015;

(vi) the instruments available to the customs service and state tax service does not provide a guarantee regarding compliance with the necessary conditions of beneficiaries benefiting from tax and customs facilities. Conducting audits post-customs clearance with a delay of 3-4 years after the import and distribution of goods as humanitarian aid to ensure relevance and rezultativitatea these measures.
In the opinion of the Court of Auditors, the efficiency of significant tax and customs facilities should be assessed regularly. In this regard, the objectives should be established for the performance of facilities in the same manner as in the case of loans/credits, with their monitoring and reporting. This would improve the transparency of the policy of granting and use of facilities.
The audit evaluated in detail several types of tax and customs facilities, the observations made are included in the respective compartments of the audit report attached.
Based on the above, pursuant to article 7 para. (1) (a)), article 15(1) thereof. (2) and paragraphs 1 and 2. (4) article 16 c) and art. 34, para. (3) of law No. 261-XVI of 05.12.2008, Court of Auditors decides: 1. to approve the report of the audit performance audit compliance associated system of tax and customs facilities, which are attached to this decision.
2. this Resolution and the report of the audit shall be submitted to: 2.1. The Ministry of finance, for documentation relating to the audit results, and their examination is required under the ministerial order College undertaking necessary measures, in accordance with the powers, in order to implement the recommendations in the audit report;
2.2. The Ministry of economy, for documentation relating to the audit results, and their examination are required for undertaking the necessary measures in accordance with the powers, in order to remedy situations where they discover and implement the recommendations in the audit report;
2.3. The customs service and the main State Tax Inspectorate, for documentation, and shall be required to: 2.3.1. to examine the audit results at meetings of collegial organs of leadership;
2.3.2. to elaborate and implement concrete measures to implement the recommendations and removing deficiencies observed;
2.4. The Moldovan Government, for information, and it is proposed, in conjunction with the parties concerned, examine the situation in the field of facilities provided by the State in order to determine opportunities for their review, monitoring and evaluation of their impact on the national economy;
2.5. the Permanent Parliamentary Commission for economy, budget and finance, for documentation.
3. About measures taken to execute subpunctelor 2.1-2.3 of the present Decision and concerning the implementation of the recommendations of the audit, shall inform the Court of Auditors in its half-yearly period of 18 months from the date of its publication in the Official Gazette of the Republic of Moldova.
4. this Decision shall be published in the Official Gazette of the Republic of Moldova in accordance with article 34 para. (7) of the law No. 261-XVI of 05.12.2008.