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National Audit Office Press Notice

Inland Revenue: Exchange of Information on Direct Taxation within the European Union

Report by the Comptroller and Auditor General
HC 276 1997/98
5 November 1997
ISBN: 0102779988
Price: £12.85

Sir John Bourn, head of the National Audit Office, reported to Parliament today on Inland Revenue’s arrangements for exchanging information with other national tax authorities in the European Union which were found to be generally successful.

The National Audit Office, along with 11 other Supreme Audit Institutions of the European Union, examined the extent to which their national tax authorities exchange information with each other on direct taxation under the provisions of the Directive on Mutual Assistance. The Netherlands Court of Audit, on behalf of the participants, presented the combined results of the examination to the Presidents of the European Parliament, the European Court of Auditors and the European Commission on 27 October 1997. A copy of their report is at appendix 1 to the National Audit Office report.

On the performance of Inland Revenue, the National Audit Office found that:

• the Inland Revenue had established an operational Unit largely dedicated to exchanging information and responsible for the majority of exchanges;
• the volume of information exchanged by the Inland Revenue compared favourably with that of the other 11 tax authorities covered by the examination; and
• whilst it was not always possible to quantify the impact of information exchanges, it was clear from individual cases that they had enabled the Inland Revenue to recover millions of pounds of unpaid tax, and in one case to prove a fraud totalling £219 million.

The National Audit Office recommended that the Inland Revenue should consider whether there was scope for them to increase awareness within the wider Department of the importance and scope of the Unit’s work by:

• including the exchange of information in the Department’s internal training courses; and
• including summary details of the volume of information exchanged, and financial benefits where known, in their Annual Report.

On arrangements for the exchange of information more generally within the European Community the National Audit Office considered that there were a number of shortcomings which the Inland Revenue were well placed to take forward as an active member of the European Council’s Working Group on information exchange. They include, for example, the need to:

• agree a common basis for recording information;
• exchange information in a form that can be readily used by the recipient, and explore the possibility of using standard documentation for requesting and exchanging information to reduce delays and problems; and
• agree a code of conduct on the time taken to provide information.

Notes for Editors

In December 1977, the Council of the European Communities adopted a Directive on Mutual Assistance designed to strengthen co-operation between tax authorities by requiring them to provide each other with the information they need to make correct assessments of tax on income and capital. The Directive recognised that the progressive removal of regulatory barriers to cross-border trade and services had underlined the importance of such co-operation, not only to ensure correct assessments but to prevent tax evasion and fraud. The United Kingdom assimilated the Directive into its law in 1978.

The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office employing some 750 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

Press Notice 58/97
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