The Deputy Head of Communication and International Cooperation Unit if the Office of the Ombudsman of the Republic of Latvia Edgars Lākutis reports that the ombudsman recommends the State Revenue Service (VID) to develop an automatic notification distribution algorithm for taxpayers if unused ineligible contributions are detected.
This institution is also recommended to check ambiguities expressed by taxpayers more deeply – this includes making sure VID estimates are correct. When explaining tax payment estimates, it is recommended to pay more attention to their comprehensibility.
Lākutis reminds that if the taxpayer makes a mistake in the VID EDS system but still pays the correct amount to the single tax account,
VID still calculates a fine
and ignores the fact that the paid tax amount is larger than the incorrectly calculated amount.
Currently the single tax account system does not provide for warning the taxpayer if there is a discrepancy between the calculated and paid tax amount.
The ombudsman assessed in an inspection case whether the single tax account adopted by VID in 2021 is user-friendly and comprehensible to taxpayers as an automated system. The ombudsman asked VID to find a solution within a month’s time.
For more than a year, the taxpayer was charged a late payment fee for the fact that within the period prescribed by law he had mistakenly declared a smaller amount of the mandatory state social insurance contribution as an employee (in the particular case, with an employer abroad), but in fact paid a larger amount into the unified tax account, or as much as he actually had to pay by law.
In this case the single tax account’s administrating algorithm for the payment of mandatory state social insurance contribution, ignoring the correctly paid tax amount. On the other hand, the difference between the highest amount actually paid and the erroneously calculated lower amount of tax in the single tax account remained as ineligible payments, which were directed to the discharge of subsequent liabilities – including the settlement of the calculated late payment fee.
The taxpayer, when paying the mandatory state social insurance contribution, trust their obligations before the state are settled. VID, on the other hand, without excluding the possibility of error, considered that the applicant himself was responsible for the correct completion of the declaration and payment of the tax.
The ombudsman found that the single tax account system is an automated system that does not provide a way to sent warnings to residents if the account finds ineligible amounts. It would be a good idea to incorporate a warning system, which would call attention to the taxpayer to the existence of possible errors and ask them to correct them.
The ombudsman agrees that taxes must be paid and that everyone is responsible to fill in tax declarations correctly and pay taxes. However, at the same time, the ombudsman stresses that the tax administration system should be fair. If VID has an effective tax collection system and approaches taxpayers fairly, it is important for this gesture to be complete – convenient for taxpayers to use and provides them with information about mistakes and ways to fix them.
“This is the case in which we want to see more taxpayer-friendly institution. If we look at this formally, the taxpayer is the one responsible for the mistake, but
the lack of a search for solutions to help improve the system creates a sense of injustice,
which impedes the formation of a positive relationship between society and the institution,” stresses Ombudsman Juris Jansons.
The ombudsman revealed that VID does not check the validity of tax payments on its own unless taxpayers ask for explanations. This was done only after the ombudsman stepped it and it was found that it is necessary to perform re-calculation. Additionally, the ombudsman concluded that VID’s created transcript of the calculation is ambiguous for the average taxpayer.
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