PERFORMANCE AUDIT - VAT DEPARTMENT INSPECTORATE UNIT

The report ‘Performance Audit – VAT Department Inspectorate Unit has been submitted to the Honourable Speaker for presentation in the House of Representatives in accordance with sub-paragraph 8(b) of the First Schedule of the Auditor Generaland National Audit Office Act, 1997.

This performance audit sought to evaluate the efficiency and effectiveness of three main functions of the Inspectorate Unit; namely, fiscal receipt spot check inspections, business surveillance and desk audits. These activities contribute towards ensuring that registered suppliers of goods and services comply to the provisions stipulated by the Value Added Tax Act 1998.

Fiscal receipt spot inspections mainly focus on the issuing of fiscal receipts, the functioning of fiscal devices and the keeping of sales records. During 1999, the VAT Department performed circa 6,000 fiscal receipt spot check inspections.

Business surveillance inspections are carried out over a number of hours or days to ascertain the level of traders' business activity. During 1999, the Department performed around 1,300 business surveillance inspections.

The desk audit function within the VAT Department entails the reviewing and raising of provisional assessments in respect of traders' business activities. Nearly 3000 cases were reviewed and yielded a net value assessment of circa Lm2 million.

This audit has identified a number of issues that are hindering the Inspectorate Unit from attaining better results. The lack of predetermined and quantifiable targets relating directly to the functions in question does not enable the establishment of the degree of efficiency and effectiveness of the Inspectorate Unit.

The performance of fiscal receipt spot check inspections, business surveillance inspections and desk audits did not always attain the desired level of performance due to:

• Three legislative changes in the taxation system within the span of five years meant that the VAT Department had to conduct fundamental changes to its internal organisation to the detriment of developing methodologies and techniques to increase revenue;

• Limitations of a targeting strategy relating to fiscal receipt spot check inspections and business surveillance inspections adopted by the Department;

• Assessment techniques still in the development stage;

• The use of information technology in registered person risk assessment is still minimal;

• Difficulties in recruiting better-qualified inspectors and the lack of an on-going training programme.

The National Audit Office recommends that the VAT Department:

• increasingly adopts risk based targeting when selecting businesses for fiscal receipt spot check inspections, business surveillance and assessment reviews;

• exploits further opportunities arising out of information technology by integrating the various electronic systems currently in use by the Department;

• generates benchmarks and performance indicators for its various operations to enable better management control.

Developments

Government is currently re-engineering the tax collection function. It is envisaged that this process will ensure the utilisation of more effective assessment techniques to ascertain that all moneys due to Government are duly collected.