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of July 29, 2016 No. 34

About the Report of the compliance audit associated with audit of system effectiveness of tax and customs privileges

Audit Chamber in the presence of the Deputy Minister of Finance of Mrs. Veronika Vragaleva; chief of the Main state tax authorities Mr. Sergey Pushkutsa; deputy director general of Customs Service Mr. Grigory Ionitsov; the head of department of policy on investment attraction of department of investment policy and competitiveness of the Ministry of Economics Mr. Vladimir Krivchun, and also other officials, being guided by Art. 2 (1) and Art. 4 (1) a) the Law on Audit Chamber No. 261-XVI of 5:12. 20081, considered the Report of the compliance audit associated with audit of system effectiveness of tax and customs privileges.


(1) the Law on Audit Chamber No. 261-XVI of 5.12.2008 (further – the Law No. 261-XVI of 5:12. 2008).

The auditor mission was held based on Art. 28 and Art. 31 of the Law No. 261-XVI of 5.12.2008 and according to the Program of auditor activities of Audit Chamber for 2016 (2). Audit was planned and carried out according to the International standards of audit applied Calculating palatoy3 (ISSAI 100, ISSAI 300, ISSAI 400), and with the advanced practice in the field of public audit.


(2) the Resolution of Audit Chamber No. 46 of 14.12.2015 "About approval of the Program of auditor activities of Audit Chamber for 2016".

(3) the Resolution of Audit Chamber No. 60 of 11.12.2013 "About application of International standards of audit of the supreme bodies of audit 3 levels – ISSAI 100, ISSAI 200, ISSAI 300, ISSAI 400 within the auditor missions of Audit Chamber"; The Resolution of Audit Chamber No. 7 of 10.03.2014 "About application of the guidelines of audit (ISSAI 1000-9999) within public audit".

The purposes of audit and the sphere of scope of activities of external audit consisted in assessment of conformity of administration of separate types of tax and customs privileges, for the purpose of identification of serious problems and also if the established mechanisms on their approval, application, the reporting and monitoring are functional.

Having considered the submitted Report of audit, and also explanation of the officials who were present at public meeting, the Audit Chamber established:

tax and customs privileges are determined as departure from normal structure of taxes which reduce the income of the national public budget and exert considerable impact on finance of the state in general. The amount of the tax and customs privileges provided by the state for 2011-2015 (estimated and reflected by their administrators), is equivalent approximately 57,4 of one billion lei.

Only for 2015 their amount constituted one billion lei about 14,7 that constitutes more 48, % of the performed expenses of the government budget for the same year (30,1 of one billion lei), and is the highest level over the last 5 years.

Besides, in the context of considerable amount and influence of tax and customs privileges for the income of the national public budget, audit notes that about 50 types of tax and customs privileges are applied for more than 19 years without their change, review or necessary adjustment.

At the same time specific weight in gross domestic product tax and customs privileges constitute 12,1 of % and, respectively, 37, % - in the national public budget, and in the government budget and in budgets of administrative and territorial units – about % 50,9.

Tax and customs privileges were generally estimated by audit from the point of view of responsibility: what information on privileges forms the basis for decision making in case of development of the tax and budget policy; what data are available concerning the cost of the privileges administered by persons responsible for this process; costs and results, and also procedure for their reflection in the reporting.

Based on results of the held auditor events it is noted that tax benefits which actually represent not coming income the budget which shall be used by their beneficiaries in the planned purposes as part of system of financial management of the state do not provide proper management according to their economic value.

Moreover, quality of planning process and reasons for amount of tax and customs privileges was negatively affected by lack of procedures and not establishment of the obligations connected with this stage for each public body which is legally involved in this process according to legislation provisions.

Continuous growth of amounts of tax and customs privileges is over the last 5 years caused by expansion of range of tax benefits which at the end of 2015 constituted 105 types of tax exemptions and charges. Thus, in recent years the quantity of privileges increased, also the tendency of increase in their total amount was registered. This evolution contradicts availability and evolutionary growth of budget deficit, and also public debt. Moreover, diversification of the applied privileges causes increase in level of other taxes.

Also audit confirms that the organizations given the right of administration of tax and customs privileges do not provide proper monitoring of process of execution of the corresponding privileges, and functionality their kontroly is limited to non-use in full of all legal tools which they have.

On the other hand, the data reflected by the Ministry of Finance about amounts of tax and customs privileges do not cover/include all privileges used by beneficiaries. Besides, not all amounts were estimated, and it affects reliability and completeness of process of the reporting, and the complete and authentic information concerning the cost/scope of the used privileges is not provided to concerned parties. Thus, discrepancy of the reporting of the Ministry of Finance under tax and customs privileges made about 5762,8 one million lei less in comparison with data of customs and tax authorities, reliability and completeness of the data provided to Parliament and the public about actual cost of the provided privileges thereby are not provided.

More real and convincing impression about the current situation in the sphere of the corresponding privileges can be gained by carrying out joint inventory with coding of each type of privilege, and also with development of new format of their reflection in the reporting.

Proceeding from the fact that tax and customs privileges have significant effect on the income of the state plans for monitoring and execution of the purposes of application of the privileges established for date of their legal approval were not developed yet. No specific objective according to social and economic effect of tax and customs privileges was assigned to one central body. At the same time the Ministry of Finance which is responsible for monitoring of tax and customs privileges did not provide carrying out the analysis of effect/result of provision of the corresponding privileges, and was limited only to generalization and systematization of information at the level of their cost.

In the same context it is noted that:


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