CONTENTS - Valsts ieņēmumu dienests gada parskats eng.pdf · CONTENTS INTRODUCTION OF THE SRS DIRECTOR GENERAL 2 ... New web site of ... - to form social idea about the necessity

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CONTENTS �

INTRODUCTIONOFTHESRSDIRECTORGENERAL 2

BASICINFORMATION 3

OPERATIONPRIORITIESANDRESULTS 6

RESULTSOFBUDGETPROGRAMSANDSUBPROGRAMS 7

MANAGEMENTANDOPERATIONIMPROVEMENTSYSTEMS �3

TAXADMINISTRATION �5

TAXREVENUECOLLECTIONBYTHETYPESOFTAXES 20

CUSTOMSACTIVITIES 32

COMBATINGFINANCIALCRIME 50

SUPERVISIONOFEXCISEGOODSCIRCULATION 57

CONTROLOFTHEOPERATIONOFSTATEOFFICIALS 63

TAXENFORCEMENTANDRESOLUTIONOFDISPUTES 67

INTERNATIONALCOOPERATION 7�

BUDGETINFORMATION 74

PERSONNEL 78

SRSANDSOCIETY 82

PLANSFOR2006 86

CONTENTS

2

INTRODUCTION OF THE SRS DIRECTOR GENERAL

As a result of an active and intensive working year,

theStateRevenueServicehasachievedgoodwork results.

ThebasictaskoftheStateRevenueServiceistoensurethe

implementation of state budget revenue plan and, in this

sense,year2005hasbeenparticularlysuccessful–taxand

non-taxrevenueadministeredbytheSRSintostatebudget

has been collected by 29,5% more than in 2004, and that

is the greatest increase over the last 7 years. Of course,

the increaseof taxrevenuehasbeenpromotedalsobythe

economicdevelopmentofLatvia,though,undeniably,itisas

welltheresultofworkdonebytheSRS.

Toensuregoodworkresults,greatattentionlastyearwaspaidtotheimprovement

oftaxcontrolactivities,introductionofvariousnewandmodernworkmethods–the

developmentofdatabases,riskassessmentoftaxavoidanceandevasion,purposeful

and efficient implementation of tax control measures, as well as the introduction of

movementofelectronicdocuments.Inthesameway,strategicplanshavebeendeveloped

lastyear,aswellastheiractionplansforallmainstructuralunitsoftheservice.

As regards the contribution of the State Revenue Service to the improvement

ofbusinessenvironment, Iwould like tonote that theservicehascontinuouslypaid

specialattentiontoinformationandeducationoftaxpayers,includingtheorganisation

ofdifferentseminarsfreeofcharge.Lastyearagreatnumberofproposalsalsohave

been made for the amendments of legal provisions to prevent the deficiencies found in

legalprovisionsonthebasisofconstructivesuggestionsoftaxpayers.Newwebsiteof

theStateRevenueServicehasbeendevelopedlastyearthat,incomparisontotheold

one,ensuresverywideopportunitiesand is considerablymoreconvenient sourceof

informationacquisition.

ThetaskandobjectiveoftheStateRevenueServiceistopromotevoluntarytax

payment,therefore,in2006wewillproceedwithalreadystartedactivitiestobecomethe

partneroftaxpayersinfairaccomplishmentofliabilitiestowardsstate,specialattention

payingtotheimplementationofdifferentpreventivemeasures.

DirectorGeneraloftheStateRevenueService

Dzintars Jakāns

3

BASIC INFORMATION

The foundation of the SRS

Thelaw„OntheStateRevenueService”wasadoptedinNovember28,�993;it

determined the establishment of unified revenue administration institution – the State

RevenueService(hereinafter–theSRS),combiningtwoorganisationsfoundedafter

theretrievalofindependenceoftheRepublicofLatvia–StateInspectionofFinance

that was responsible for tax collection, and Customs Board that was responsible

for customs duties and fees and international trade. Main objectives of the SRS

establishmentwere:

- toachievetheestablishmentofmorefairtaxsystem;

- toimproveco-operationwithtaxpayers;

- toformsocialideaaboutthenecessityoftaxpayment;

- toestablishrespectivetaxpayerservices;

- toreducebureaucraticprocessandprocedures;

- toreduceadministrativeexpenditure.

Today theSRS is an institutionof direct governanceunder the supervisionof

MinisterofFinancethatensurestheaccountingoftaxpaymentsandregistrationof

taxpayers,collectionofstatetaxes,feesandothermandatorypaymentsdetermined

by state in the territory of theRepublic of Latvia, collection taxes, fees and other

mandatorypaymentsintotheEUbudget,andalsoensuresthecollectionofduties,

feesandothermandatorypaymentsoncustomsborder,carriesoutthepolicyofstate

customs, implements efficient protection of society and environment and ensures the

observationofcustomsregulationson theexternalborderof theEUand thestate

territory,balancingitwithpromotionoflegalexternaltrade.Mainlegalactsregulating

theoperationoftheSRSare:thelaw„OntheStateRevenueService”,law„OnTaxes

and Fees”, Customs law, the European Union Customs code and regulations of its

introduction, law „On Prevention of Conflict of Interest in Activities of Public Officials”,

StateCivilServicelaw,Labourlaw,LabourProtectionlawandotherlegalprovisions

4

BASIC INFORMATION

The Objectives of the SRS

- ensureequaltermsforalltaxpayersinthestate;

- promotetaxcompliance;

- formthecivicconsciousnessaboutthenecessityofpayingtaxesandvoluntary

taxpayment;

- promotetradeandentrepreneurship;

- ensurediverseandqualitativeserviceforclients;

- protect society, economy and environment, developing the detection and

preventionofviolationofcustomsregulationsandcriminaloffences.

The Main Tasks of the SRS

- ensure the collection of the state taxes, fees and othermandatory payments

administeredby theSRS in the territoryof Latviaandon customsborder, as

wellasthecollectionoftaxes,feesandothermandatorypaymentsfortheEU

budget;

- implementstatecustomspolicyandensuretheprotectionofcustomsborder;

- preventanddetectcriminaloffencesinthesphereofstatetaxes,feesandother

statemandatorypayments,aswellasinthesphereofcustomsaffairs;

- ensure the training of the SRS officials (employees), as well as consult taxpayers

according to the procedure determined by the legal provisions in issues of

applicationoftaxlegislation;

- registertaxpayersinaccordancewiththeproceduredeterminedbylegalprovisions

andcontroltheconformityofregistrationdocumentstotherequirementsoflaws

andactualsituation;

- ensuretheimplementationoflegalprovisionsregulatingthemovementofexcise

goods, react to international situation in the sphereof safetyandprotect the

societyandenvironmentfromouterthreat;

- protecttheEUexternalborderandco-operatewithothernationalandinternational

institutions;

- ensurethecomplianceofSRSperformancewiththeprioritiesoftheEU.

5

BASIC INFORMATION

Structure of the SRS

FirstDeputyDirectorGeneral–DirectorofNational

CustomsBoard

DeputyDirectorGeneral

FirstDeputyDirectorGeneral–DirectorofNational

TaxBoard

DeputyDirectorGeneral

NationalCustomsBoard

CustomsCriminalInvestigation

FinancePolice

NationalTaxBoard

StrategicDevelopment

ProcurementandAdmnistrationof

Resources

IT

CorruptionPrevention

FilingandRecordsOffice

Director

Latgaleregionaloffice

Zemgaleregionaloffice

Vidzemeregionaloffice

Rigaregionaloffice

Kurzemeregionaloffice

RigaCustomsregionaloffice

DGOffice

FinancialDepartment

LargeTaxpayers

LegalDepartment

InternalAudit

PersonellManagement

ExciseGoods

Pre-courtResolutionofTaxDisputes

InternationalRelations

SecrecyRegimeAssurance

6

OPERATION PRIORITIES AND RESULTS

PRIORITIES AND RESULTS OF THE ACTIVITIES

• Budgetprogrammsandsub-programmsperformanceindicators

• Mangementandoperationimprovementsystems

• Taxadministration

• Taxrevenueperformancebytypesoftaxes

• Customsmatters

• Combating of financial crimes

• Supervisionofexcisegoodsmovement

• Control of the operation of state officials

• Taxenforcementandresolutionoftaxdisputes

• Internationalcooperation

7

RESULTS OF BUDGET PROGRAMS AND SUBPROGRAMS

Analysisoftheimplementationofresultsofbudgetprogramsandsubprograms

and the evaluation of efficiency of the expenditure of state budget assets

Title of results

Competent

structural

unit of the

SRS

Plan

of the

report

period

Actually

in report

period

Explanations of the

deviation of results

33.00.00 program “State tax administration”

Numberofstaff

units

Finance

department

3602 3284 StaffturnoveroftheSRSin2005is�2.6%.

In2005onaverage thereare9%vacan-

cies of staffing, to which competitions have

beenannounced

Stateandmunicipal

income inland ad-

ministered by the

SRS(millionsofLs)

National

TaxBoard

2284,8 243�,70 State and municipal income inland

administeredbytheSRSwerecollectedin

theamountof243�.7millionLatsandthe

implementation of plan reached �06.4%.

The main factors influencing the excess of

plan:

-changes of legislation (the change of

payment procedure by Latvia entering

intotheEU,thechangeoftaxrates)and

economicprocessesinstate(theincrease

oftheamountsofforeigntrade,increase

of the amounts of transferred cargo,

increaseofretailingturnover,increaseof

consumptionprices);

-the improvement of tax administration

process(developmentoftaxcontrolwork,

theobjectiveofwhichistoensurethatall

taxpayerswouldpaythedeterminedtax

payments in budget in defined amounts

accordingtocertaindeadline,reducethe

possibilitiestoevadetaxpayment,thus,

preventingthelossesofbudget,ensure

theprotectionoffairtaxpayers);

8


-the improvement of taxpayers’ service

work, ensuring taxpayers’ consultation,

informationandeducation in the issues

oftheapplicationoftaxlegalprovisions;

-theincreaseofthenumberoftaxpayers

– legalpersons (inDecember3�,2005

therehavebeenregistered�30772tax-

payers–legalpersons,thatarefor3496

taxpayersor2.7%morethaninDecem-

ber3�,2004)

34.00.00 program “Customs operation guarantee”

Numberofstaff

units

Finance

department

�53� �4�8 StaffturnoveroftheSRSin2005is�2.6%.

There are on average 7% vacancies of

staffing in 2005, to which competitions

havebeenannounced

includingspecialised

attachesinBrussels

� �

Collection of Cus-

tomspayments(mil-

lionsofLs.)

National

Customs

Board

2�3,4 225,4 In2005theexcisetaxrateforexcisegoods

was increased(beerandalcohol)andthe

number of transactions taxed with VAT

increased,crossingtheEUexternalborder,

aswellasthetotalturnoverofgoods.

Customscontrol

stationsonrailways

havebeenadopted

forexploitation

National

Customs

Board

�50000 208382 Innovationshavebeen introduced in the

sphereofcustomscontrolin2005:

�)newprocedureoffreightphysicalcon-

trolhasbeendeveloped;

2) identification and control of functions

delegatedtocustomsandcriteriaoftheir

implementation;

3) three freight scanning facilities began

theirwork in2005(two inSRSLatgale

RegionalinstitutionandoneinSRSRiga

Customsregionalinstitution)

9


Customscontrol

stationsonrailways

havebeenadopted

forexploitation

National

Customs

Board

� x In2005therehadbeenplannedtoaccept

forexploitationthecustomscontrolstation

on railway „Šķirotava”, but, taking into ac-

countthefactthat,duringtheconstruction

operationsduetotheprojectshortcomings

and inadequacy with the real situation ,

thereappearedthenecessitytocarryout

supplementaryworknotprovidedbyproj-

ectthatinitiallydelayedtheplannedcourse

of construction work, the implementation

deadline of the construction agreement

wasprolongedtillMay3�,2006.

Railwayweighing-

machineinstalled

ontherailway

National

Customs

Board

2 x In2005therehasbeendevelopedproject

ofrailwayweighing-machinecustomscon-

trol station „Šķirotava” and, after the de-

velopment of the project was finished, pro-

curementprocedurewaslaunched-open

competitionwhereformsofapplicantswere

notreceived,and,thus,themethodofpur-

chasewas changed into theprocedureof

negotiation.Duetothedelayofpurchase

procedure,theagreementontheconstruc-

tionofscaleswassignedonlyinDecember

of2005.

Materialsconsidered

accordingtothepro-

cedureofArticle�09

oftheCodeofCrimi-

nalProcedureofthe

RepublicofLatvia

Customs

Criminal

Board

69 69

Materialsconsidered

accordingtothe

procedureofArticle

369ofthelawof

CriminalProcedure

Customs

Criminal

Board

�5 26 Reorganisation of the SRS customs insti-

tutions involved in fight against smuggling

hasbeencarriedoutin2004;itgaveanop-

portunityforSRSCustomsCriminalBoard

toraiseactualindicatorsofeffective

�0


ness,comparingwith theone foreseen in

theplanof2005.

Criminalcaseshave

beenprosecuted

Customs

Criminal

Board

48 48

Criminalprocedures

havebeenevoked

Customs

Criminal

Board

�2 3� Reorganisation of the SRS customs insti-

tutions involved in combat of smuggling

hasbeencarriedoutin2004thatgavean

opportunityfortheSRSCustomsCriminal

Boardin2005toraiseactualindicatorsof

effectiveness,comparingwiththeonefore-

seenintheplanof2005.

Finishedinvestiga-

tions

Customs

Criminal

Board

�0 �4

Criminal cases sent

for evoking criminal

persecution

Customs

Criminal

Board

2� 32

Statementsofad-

ministrativeoffences

madeinimplement-

edcontrols

Customs

Criminal

Board

300 338

35.00.00 program „Provision of detection and prevention of offences of

financial nature, corruption””

Numberofstaff

units

Financede-

partment

256 23� StaffturnoveroftheSRSin2005is�2.6%.

On average there are �0% vacancies in

staffing in 2005 to which competitions have

beenannounced

Thematerialshave

beenconsidered

accordingtothe

procedureofArticle

�09ofTheCodeof

theCriminalProce-

dureoftheRepublic

ofLatvia

Finance

Police

Department

907 92� New lawofCriminalprocedure came into

forcebyOctober�,2005and the related

changesintotheprocedureandorganisa-

tionof investigationwork,aswellaswith

theoptimisationof the implementationof

functions influencing the executions of in-

dicators

Criminalcaseshave

beenprosecuted

Finance

Police

Department

48� 483

��


Criminalprocedures

havebeenevoked

Finance

Police

Department

�50 229

Criminalcasessent

forevokingcriminal

persecution

Finance

Police

Department

320 393

Statementsof

administrative

offencesmade

inimplemented

controls

Finance

Police

Department

500 498

Controlsperformed

instateandmu-

nicipalinstitutions

onthenon-submis-

sionofthelistsof

state officials and

theamendmentsof

theselistsaccord-

ing to the definite

procedureandthe

submissionofin-

completelists

Corruption

Prevention

Department

300 422 Numberofunplannedcontrolactivitiesper-

formeduponthedemandofothercontrol-

linginstitutionsincreasedin2005.

Thetaxreturns

of state officials

received,registered

andputindatabase

Corruption

Prevention

Department

60000 7877� The number of officials has increased by

state officials changing workplaces, by de-

velopingnewinstitutionsandreorganising

theexistinginstitutions

Lists of state officials

andtheamendments

oflistsofstateand

municipalinstitutions

received,registered

andputindatabase

Corruption

Prevention

Department

3500 382� Bydevelopingnewinstitutions,aswellas

intheresultofactiveSRScontrol

�2


Decisionsmadeon

bringingtoadminis-

trativeresponsibility

Corruption

Prevention

Department

�00 580 Implementingmorestrictcontrolinobser-

vation of deadlines for submission of the

tax returns of state officials and the obser-

vationofprocedure for thesubmissionof

the lists of state officials and the amend-

mentsoftheselists.

37.00.00 program “Provision of the documentation required for legal circulation of goods”

Numberofstaff

units

Finance

Department

�5 0 In 2005 the possibility was evaluated to

movenon-staffemployees,whoensurethe

administrationoftherealisationofwaybills

of goods, to staff. Itwill be implemented

in2006.

Plan and Implementation of Financing Allocated to Prior Activities in 2005

Title of Prior Activity

Financing allocated

and used for prior

activity (Ls)

Additionally assigned

staff units for the

implementation of

prior activity

Guarantee of administrative capacity in relation

to administrative, technical, finance management

and control of the EU co-financing projects

57932� 57

The SRS information systems and the improve-

mentandmaintenanceofrelatedinfrastructure

857735 -

Administration of excise tax on oil products and

guarantee of monitoring of the movement of oil

products

295795 25

FinishingtherenovationoftheSRSRigaCustoms

Regional Office in Riga, Citadeles street 1

720�25 -

The maintenance of mobile x-ray equipment for

the customs control of the EU external border

boughtin2004withintheframeworkofStateIn-

vestments’programprojectOP03„CustomsPosts

onBorders”

87000 -

The maintenance of mobile x-ray equipment for

thecustomscontroloftheEUexternalborderpre-

sentedbyUSAgovernmentin2004

69752 -

�3

MANAGEMENT AND OPERATION IMPROVEMENT SYSTEMS

Systems of Internal Control

Toimproveanddevelopthesystemsofinternalcontrol,theSRSisregularlyper-

forminginternalaudits.Accordingtothestrategicplanofinternalaudit28auditswere

carried out in 2005. Most significant among them were: the evaluation of computer

engineeringguaranteesystem,theevaluationofcustomsguarantees’controlsystem,

theevaluationoflocalcustomsclearanceprocedureconformity,theevaluationofbusi-

nessinsolvencyprocessandpayingoftaxarrearscontrolsystem,theevaluationof

excisetaxadministrationofoilproducts,theevaluationofconclusionandimplementa-

tionofeconomiccontracts,controlofaccounts,theevaluationofmanagementcontrol

system,theevaluationoftheplanningorthepurchasesofcomputersandsoftware

andthenecessityofnewtechnologies,theevaluationofintellectualpropertycontrol

work,theevaluationoforganisationandco-ordinationoftaxpayers’controlmeasures,

theevaluationofthecomplianceofmanagementinternalcontrolmeasureswiththe

implementationofthetasksdeterminedbytheSRSanti-corruptionplan,theevalua-

tionofworkqualityofconsiderationoftaxpayers’complaintsandapplicationsinthe

sphereof taxadministration, theevaluationofmovement, registrationand control

ofdocuments,theevaluationof„envelopesalaries”eliminationcontrolsystem,the

evaluationofsafetyandcontrolofinformationsystems,theevaluationofadministra-

tionworkofTraditionalOwnResourcesAaccount,theevaluationofcustomsdebtad-

ministrationprocess,theevaluationoftheadministrationofTraditionalOwnResources

separateaccount(Baccount),theevaluationofinternalcontrolsystemoftheimple-

mentationofco-operationcontracts,theevaluationofbudgetimplementationof2004

(utilisation of financial resources according to programs, allocations and estimates,

theirconformitytotheannualreport), theevaluationofcontrolsofdatacredibility

ofVATdeclarations,theevaluationofauditprocessworkqualityandinternalcontrol

system, the evaluation of customs control of agricultural goods’ export, the efficiency

evaluationofriskanalysissystemincustomscontrolprocess,theevaluationofcontrol

systemofaccountingandtaxcalculationofphysicalpersons–taxpayers,theanalysis

of recommendations and revision materials implemented by State Audit Office, the

evaluationofsupervisionandcontroloftheirimplementation,evaluationofcompeti-

tions,staffselectionandacceptanceoperation.Oneunplannedinternalaudithasbeen

alsocarriedoutin2005–theevaluationoftaxpayers’servicequality.

�4

Major strategic projects implemented and launched in 2005:

- SRS Plan of Measures for the Prevention of Corruption Possibilities has been

approvedinFebruary�0,2005foryear2005-2008;

- TheStrategyofSmugglingPreventionandCombatingofSRScustomsinstitutions

hasbeenapprovedinMarch22,2005foryear2005-2009;

- TheSRScustomsoperationstrategyhasbeenapprovedinMarch24,2005for

year2005-2009;

- TheSRStaxadministrationstrategyhasbeenapprovedinApril�5,2005foryear

2005-2009;

- TheSRSStrategyofPreventionandDetection(Combating)ofCriminalOffences

intheSphereofStateRevenueanditsintroductionplanhavebeenapprovedin

September20,2005foryear2005-2009;

- The development of SRS Strategic memorandum for 2006-20��, SRS Client

servicestrategyfor2006-20��,SRSPersonnelmanagementanddevelopment

strategyfor2006-20��andSRSStrategyofCorporateIdentityConsolidationfor

2006-20��,aswellasthedevelopmentoftheintroductionoftheactionplansof

theabove-mentioneddocumentswasstartedin2005.

MANAGEMENT AND OPERATION IMPROVEMENT SYSTEMS

�5

TAX ADMINISTRATION

ThemaintasksofSRSintheareaoftaxadministrationare:toensurecollectionof

statetaxes,feesandothermandatorypaymentsadministeredbySRSintheterritory

ofLatvia,aswellascollectionof taxes, feesandothermandatorypayment to the

EuropeanUnionbudget, to registerandensurerecordsof taxpayers inaccordance

with the procedure provided by the legal provisions and to control conformity of

registrationdocumentswith the requirementsprovidedby the lawsand theactual

status,toconsulttaxpayersconcerningquestionsofapplicationofthelegalprovisions

inaccordancewiththeprocedurestatedinthelegislation,toco-ordinateandcarry

outexchangeofinformationbetweentaxadministrationsandjointinternationalaudits

inaccordancewithsignedinternationaltreatiesandlegislativeactsoftheEuropean

Union.TheNationalTaxBoard,SRSLargeTaxpayersDepartment(hereinafter-LTD)

and SRS territorial offices in co-operation with state and local government institutions

ensuretheperformanceofSRStasksintheareaoftaxadministration.

Thefollowingprioritieshavebeenstatedinthetaxadministrationfortheyear

2005:

- ensuringtheperformanceofthetaxrevenueplan;

- controlofthevalueaddedtaxfortransactionscarriedoutinLatvia,aswellas

withintheEuropeanUnion;

- controlofpersonalincomefornaturalpersons;

- controlofpaymentofsalaries“inenvelopes”;

- improvement of administrative co-operation and mutual assistance with the

EuropeanUnionmemberstatesintheareasofcontrolofthevalueaddedtaxand

controloftaxpayersinvolvedinmovementofexcisegoods;

- improvementofperformancequality.

Number of taxpayers

AccordingtothedataoftheTaxpayersRegisteron3�December2005,ifcompared

to3�December2004,thenumberoftaxpayers-legalpersonshasincreasedby3496

legalpersons,thenumberofVATtaxablepersonshasincreasedby3087persons,the

totalnumberofnaturalpersons-employeeshasincreasedby206�6naturalpersons

andhasreached939747naturalpersonsattheendoftheyear2005,butthenumber

ofself-employedpersonshasincreasedby2�9�self-employedperson.

�6

TotalbudgetrevenuesadministeredbySRS(millionLs.)

�456.35�634.50

�823.202��.�2

2657.07

0

500

�000

�500

2000

2500

3000

200�.g. 2002.g. 2003.g. 2004.g. 2005.g.

Performance of budget revenues administered by SRS

Taxandnon-taxrevenuesadministeredbySRSconstitute inthestatebudget

2657,07millionLatsintheyear2005,thatisby545,95millionLatsor25,9%more

thanintheyear2004,andthisisthebiggestincreaseduringthelastsevenyears.

Theperformanceoftherevenueplanfortheyear2005is�06,4%(itshouldbenoted

thatinaccordancewiththelaw““Amendmentstothelaw“OnStateBudgetforthe

year2005”“thebudgetrevenueplanadministeredbySRSfortheyear2005hasbeen

increasedby�74,85millionLatsor7,5%).

TAX ADMINISTRATION

Dynamicsofthenumberoftaxpayers

�27276

5548�

250�4

�30772

58568

27205

0

20000

40000

60000

80000

�00000

�20000

�40000

3�.�2.2004. 3�.�2.2005.

Legalpersons

VATtaxablepersons

Self-employedpersons

�7

TAX ADMINISTRATION

The State Budget Revenue Administered by SRS for the year 2005

Types of taxes

Revenue (million Ls)

“Difference

(the year 2005 -

the year 2004)”

Perfromence

of revenue

against the

annual plan,

%2004. 2005. million Ls %

Corporateincometax �27.85 �80.67 52.82 4�.3 �06.�

Valueaddedtax 486.67 677.�0 �90.42 39.� �09.9

Exciseduty 236.93 3�4.03 77.�0 32.5 �08.6

Customsduty �7.�5 �9.25 2.�0 �2.2 �05.6

TheBankofLatviapayments 2.26 0.49 -�.77 -78.2 �00.0

Paymentsfortheuseofstatecapital 43.73 48.36 4.64 �0.6 �0�.2

Gamblingandlotterytax 7.72 9.94 2.22 28.8 �03.�

Passengercarandmotorbiketax 4.9� 9.5� 4.60 - ��7.5

Statefeesandpayments 60.86 76.24 �5.38 25.3 �09.7

Penaltiesandsanctions �0.36 9.56 -0.80 -7.7 73.2

Othernon-taxrevenue 6.57 ��.72 5.�5 78.3 �32.8

Statesocialinsurancemandatory

paymentys

662.39 780.62 ��8.23 �7.8 �04.5

Personalincometax 435.53 509.25 73.72 �6.9 �03.7

Naturalresourcestax 8.20 �0.34 2.�5 26.2 �22.4

Total 2 111.12 2 657.07 545.95 25.9 106.4

Increaseof taxandnon-tax revenuesadministeredbySRS in theyear2005,

compared to the year 2004 was mainly influenced by:

- improvement of tax administration process

SRSTaxAdministrationStrategyfortheyears2005-2009hasbeendeveloped

in order to ensure continuity of the strategic process and single approach to

achievement of common goals. The Strategy is developed by continuing

the improvement of the on-going activities regarding improvement of tax

administration,aswellasbycarryingoutnewtasks,whicharedeterminedby

activitieswithinthecommonmarketoftheEuropeanCommunity.

�8

The most important factors and performed measures, which influenced the state

budgetrevenuesadministeredbySRSfortheyear2005:

• continuousimprovementofthenationaltaxlegislation, itbecomesmore

cleartotaxpayers;

• Co-operationbetweenthetaxadministrationandtaxpayersbecomescloser,

the level of services to taxpayers increases, taxpayers consultationwork

becomeswider,whichallowstaxpayerstoapplythelegislationproperly;

• electronicdeclarationsystem(hereinafter-EDS) is improved,application

of which allows submission of 96% of all returns, declarations and tax

calculations.TheincreaseinthenumberofdocumentsacceptedbyEDSis

anevidenceofdevelopmentofEDSsystem-��2timesduringtheperiod

200�-2005;

• increased attention is paid to de-registration of taxpayers from the VAT

TaxpayersRegisterforfailuretocomplywithtaxpayers’obligationsprescribed

bythelegalprovisions,thustryingtopreventactivitiesofdishonesttaxpayers

induetime.

- changes in legislation

WhenLatvia joined theEuropeanUnion theprocedureof paymentof indirect

taxeschangedasof�May2004.Startingfrom�may2004 indirecttaxeson

goodsimportedfromtheEuropeanUnionmemberstatesarecalculatedandpaid

bythe�5dayofthefollowingmonth,bycreatingoffsetofthepaymentterm.The

changes had the most significant influence on the revenues of the value added

taxandexciseduty,whichresultedinincreaseoftheserevenuesby37%inthe

year2005comparedtotheyear2004.

When Latvia joined the European Union, customs legislation of the European

Unionbecamebinding,thustheEuropeanUnionratesofthecustomsdutyand

tradepolicymeasureswereappliedtothosegoods,whichwereimportedfrom

thecountries,whichwerenotmemberstatesoftheEuropeanUnion.Starting

from�May2004,whentransportinggoodswithintheEuropeanUnion,customs

dutyisnotappliedanymore,butinrelationtogoodsimportedfromthecountries

outside the European Union, the European Union customs tariffs are applied.

Thusincreaseratesofthecustomsdutyrevenuehavedecreased.

TAX ADMINISTRATION

�9

TAX ADMINISTRATION

- economic processes in the country

In the year 2005 the increase of tax revenue was also influenced by increase in

theamountofforeigntrade,increaseofthevolumesoftransportedshipments,

increaseofretailtradeturnover,aswellasincreaseofconsumerprices.

- results of the economic development

In the year 2005 increase of tax revenues was influenced by growth of the gross

domesticproduct,increaseintheamountofforeigntrade,increaseofthevolumes

oftransportedshipments,increaseofretailtradeturnover,increaseofconsumer

prices,increaseoftheaveragesalariesforemployees,aswellasincreaseofthe

numberoftaxpayers-legalpersons.

20

Corporate income tax

Intheyear2005therevenueofcorporateincometaxconstituted�80,67million

Lats,whichwasby52,82millionLatsor4�,3%morethanintheyear2004andby

�0,42millionLatsor6,�%morethanplanned.

Regardlessofgradualreductionofthecorporateincometaxrateto�5%(inthe

year2002–22%,intheyear2003–�9%,intheyear2004–�5%),corporateincome

tax revenue has increased, which was influenced by payment of amounts recalculated

fortheyear2004andtheincreaseoftheadvanceamounts.

Value added tax (hereinafter - VAT)

In the year 2005VAT revenue constituted 677,�0million Lats,whichwas by

�90,42millionLatsor39,�%morethanintheyear2004andby60,95millionLats

or9,9%morethanplanned.

The national economic processes influence the amount of VAT revenue, level of

welfare of population, legal provisions, as well as flow of tax payments and the claimed

refunds.

TAX REVENUE COLLECTION BY THE TYPES OF TAXES

Corporateincometaxrevenue(millionLs)

98.42�09.7�

93.94

�27.85

�80.67

0

50

�00

�50

200

200�.g. 2002.g. 2003.g. 2004.g. 2005.g.

Valuieaddtedtaxrevenue(millionLs)

350.57 383.0�459.2 486.67

677.�

0

�00

200

300

400

500

600

700

200�.g. 2002.g. 2003.g. 2004.g. 2005.g.

2�


Excise duty

In the year 2005 the revenueof

excisedutyconstituted3�4,03million

Lats,whichwasby77,�0millionLats

or32,5%morethanintheyear2004

and by 24,75 million Lats or 8,6%

morethanplanned.

Increase of excise duty revenue

was basically determined by change

in the excise duty rates for separate

excisegoods(tobaccoproducts,oilproducts) intheyear2004andstartingfrom�

January2005,aswellaschangeofexcisetaxpaymentprocedure.

In the year 2005 the excise duty revenue structure has slightly changed, if

comparedtotherevenuestructureoftheyear2004.Proportionofexcisedutyforoil

productshasincreasedby0,7%andconstitutes63,3%,proportionofexciseduty

fortobaccoproductshas increasedby�,8%andconstitutes�3,8%,howeverthe

proportion of excise duty for other excise goods (non-alcoholic beverages, coffee)

hasdecreasedby�,4%andconstitutes�,6%,proportionofexcisedutyforbeer-

by0,8%andconstitutes2,9%,proportionofexcisedutyforalcoholicbeverages-

by0,3%andconstitutes�8,4%.

Excise duty revenues by groups of excise goods

Groups of excise goodsRevenue (million Ls)

“Difference

(the year 2005 – the

year 2004)”

Performance

of revenue

against the

annual plan,%2004. 2005. milj.Ls %

Alcoholicbeverages 44.32 57.59 �3.27 29.9 ��.�

Beer 8.70 9.06 0.36 4.2 �03.5

Tobaccoproducts 28.50 43.39 �4.88 52.2 ��8.4

Oilproducts �48.38 �98.93 50.55 34.� �06.4

Otherexcisegoods 7.03 5.07 -�.96 -27.9 �00.0

Total 236.93 314.03 77.10 32.5 108.6

Decreaseofexcisedutyrevenueforotherexcisegoodsisexplainedbythefact

that starting from � May 2004 no excise duty is collected for passenger cars and

Excisedutyrevenue(millionLs)

�60.97 �77.5�2�2.�3

236.93

3�4.03

0

50

�00

�50

200

250

300

350

200�.g. 2002.g. 2003.g. 2004.g. 2005.g.

22

motorbikes,buthasbeenreplacedbypassengercarandmotorbiketax.Intheyear2004

passengercarandmotorbiketaxhasbeencollectedintheamountof9,5�millionLats.

Personal income tax and State social insurance mandatory payments

Therevenuesofpersonalincometaxin2005amountto509,25mln.Lats,which

exceeds the level of 2004 by 73,72 mln. Lats or 16,9 % and the fulfilment of the

annualplanofrevenuesexceedstheprojectionsfor�8,05mln.Latsor3,7%.

Thecollectedstatesocialinsurancemandatorycontributionsin2005amountsto

780,62mln.Lats,whichexceedsthelevelof2004by��8,23mln.Latsor�7,8%and

therevenueplanfortheyear2005isexceededby33,28mln.Latsor4,5%.

In2005comparingwiththeyear2004theamountofbothrevenuesofpersonal

incometaxandrevenuesofthesocialinsurancemandatorycontributionshasincreased.

Thatwasduetoresultsoftheeconomicalgrowth,aswellasincreaseofaveragerate

ofwagesandamountofemployees.

Taking into consideration the fact thatwithan increaseof rateof state social

insurancemandatorycontributionsrevenuein2004tocomparewith2005,therate

ofpersonal incometaxincreasehasloweredby�,7percent,revenuesofpersonal

income tax are influenced by the following factors:

- Non-taxableminimumaswellasrateofprivilegedamountfordependantpersons

isincreasedfromtheJanuary�,2005;

- Growthinthereimbursementofpersonalincometaxaccordingtotheeffective

legislation. Upon submitting the income tax returns the taxpayers – natural

persons are entitled to receive back a part of the paid personal income tax

amountswhenpresenting thedocumentsproviding theexpenses incurred for

educationandhealthcareservices.


Revenuesofthestatesocialinsurancemandatorycontributions(millionLs)

484.06537.80

574.25662.39

780.62

0

�00

200

300

400

500

600

700

800

200�.g. 2002.g. 2003.g. 2004.g. 2005.g.

Revenuesofpersonalincometax(millionLs)

284.803�8.9�

367.28435.53

509.25

0.00

�00.00

200.00

300.00

400.00

500.00

600.00

200�.g. 2002.g. 2003.g. 2004.g. 2005.g.

23


Natural resources tax

Thecollectednaturalresourcestaxin2005amountsto�0,34mln.Lats,whichis

for2,�5mln.Lats26,2%morethanin2004andfor�,89mln.Latsor22,4%more

than targeted figures.

Theincreaseoftherevenuesofnaturalresourcestaxin2005ascomparedwith

2004canbeexplainedbytheamendmentsintheLaw„OnNaturalResourcesTax”,

changingtheprocedureofcalculationandpaymentofthenaturalresourcestax.As

fromMay�,2004thenaturalresourcestaxdoesnothavetobepaidatthemomentof

importingenvironmentallyharmfulgoodsandpackagingofgoodsintotheterritoryof

Latvia–thetaxiscalculatedandpaidfortheenvironmentallyharmfulgoodssoldor

utilisedfortheprovisionofowneconomicactivitiesintheterritoryofLatviaduringthe

precedingquarterandforthepackagingofgoodsuntilthe20thdateofthefollowing

month.Thusthenaturalresourcestaxispaidonceaquarter.Incasethecalculatedtax

inaccordancewiththebasicratesdoesnotexceed�00Latsperyearincomplianceto

theabovelawthetaxpayershallcalculateandpaythenaturalresourcestaxonceayear

-forthewholeprecedingperioduntilJanuary20ofthefollowingyear.Amendments

totheLawprovidesforthatstartedasofOctober�,2004Naturalresourcestaxin

amount of 22 Lats is applied to vehicles for the first time registered in the Republic of

Latvia. In 2005 the revenues of natural resources tax applied to vehicles for the first

timeregisteredintheRepublicofLatviaamountedto�,63mil.Lats.

Revenuesofnaturalresourcestax(millionLs)

�0.44 �0.589.73

8.20

�0.34

0

2

4

6

8

�0

�2

200�.g. 2002.g. 2003.g. 2004.g. 2005.g.

24

Income from the selling of confiscated property or other property

attributable to the state

Selling of confiscated goods and other property attributable to the State is

anothersourceofrevenuesintotheStatebudget.In2005alone,3850rulingswere

madeconcerningtheattributionofgoodsandpropertytotheStateandinthisway

24�,8thousandLatswerecollectedintoStatebudgetandintotheaccountsofproper

stateinstitutions.Ofthisamount74,7%weretherevenuefromthesellingofdaily

commoditiesattributabletotheStateand�0,7%camefromthesalesofautomobiles.

Out of the total revenues98,� thousand Lats or 40,5%werepaid into theState

budget.

In2005asaresultofcontrolmeasurescarriedoutbystateinstitutions�25,�

thousand litresofalcoholand56,4mil.cigarettesweretakenoutofcirculationand

destroyedinaccordancewiththeexistinglegislation.Thereceiptsfromthesalesof

seized fuel in 2005 amounted to 8,9 thousand Lats. In 2005 the informers of the

seizedgoodsandpropertywerepaidaremunerationof47,5thousandLats

Results of Tax Control

Tomakesurethattaxpayerhascorrectlycalculated,timelymadecorrectstate

tax,feesandothermandatorypaymentsdeterminedbyState,intothestatebudget,

theSRScarriesoutregularcontrolmeasures.InaccordancewiththeSRSTaxControl

Strategy foryear2004-2006, the following tax controlmeasureswereused in tax

controlprocess–taxauditing,thematiccheck,supervisionandinspection.In2005

theSRShas carriedoutat least one tax controlmeasure for25905 legal persons

and4290physicalpersons.Fromallthelegalpersonsin2005thethematicchecksof

thetaxcontrolmeasurescarriedoutbytheSRSwere67.7%,taxpayers’inspection

–29.�%,taxauditing–2.7%andsupervision–0.5%.


25


Tax audits

TheSRSin2005hasperformed�9�8audits,fromwhich�2�4or63%arethe

taxauditsoflegalpersonsand704or37%taxauditsofphysicalpersons.Fromthe

numberofthetaxauditsdonein2005,successfulwere�75�taxaudit,effectiveness

is9�%-whichisfor5%higherthanin2004(86%).

In2005theSRShasadditionallyassessed�48.0millionsofLatsorby50%more

thanin2004.

ThelargestproportioninadditionallyassessedtaxsumistoVAT–60.7millionsof

Lats(4�%fromtotaladditionallyassessedsum),corporateincometax–6.4millionsof

Lats(4%)andexcisetax-3.2millionsofLats(2%).Fromallthetaxauditsofphysical

persons(704),theexcisetaxcalculationtophysicalpersonshasbeenmadein507

tax audits about confiscated excise goods. In accordance with Article 22 of the law „On

PersonalIncomeTax”,theSRSin2005hasrequestedsupplementarytaxreturnsfrom

494physicalpersons,theyhavebeenreceivedfrom385physicalpersons(including

alsothesupplementarytaxreturnsrequested in2004).Theassessmentoftaxable

incomehasbeenappliedto�26physicalpersons,additionally�.4millionsofLatshave

beencalculated,includingpersonalincometaxandpenaltyfeeintheamountof0.4

millionsofLats.

Twosimultaneoustaxauditshavebeencarriedoutin2005inco-operationwith

taxadministrationsofSwedenandEstonia.

Numberoftaxaudits

27�6

�72�

2768

�887 �9�8

0

500

�000

�500

2000

2500

3000

200�.g. 2002.g. 2003.g. 2004.g. 2005.g.

Sumscalculatedintaxaudits(millionLs)

50.9

�08.7

�33.�

98.3

�48.0

020406080

�00�20�40�60

200�.g. 2002.g. 2003.g. 2004.g. 2005.g.

26

Thematic checks

In2005SRShascarriedout33�99thematicchecks,whichismorethanin2004

(330�2).Theeffectivenessofthematiccheckscarriedoutin2005is6�%,whichin

comparisonto2004(58%),hasincreasedby3%.Thematiccheckshadbeencarried

outinrelationto2255�taxpayers,including205�5legalpersonsand2036natural

persons.

In 2005 the SRS have mostly checked employers (�7 363), accounting of

companies(��398)andretailtrade(�0236).

Penaltiesappliedtodetectedoffencesinthematicchecks:

- Intotalfor947�offencesdetectedinthethematicchecksthepenaltywasapplied

inamountof689,0thousandofLsinaccordancewiththeCodeofAdministrative

offencesinLatvia;

- In5�64casestherecordkeepingwasclosedapplyingtheverbalreprimandson

pettyoffences;

- In�236caseswarningontheterminationofeconomicactivitieswereexpressed;

- In7�casestheeconomicactivitywasterminatedinordertocarryoutthespecial

checks.

Checks of employersIn 2005 SRS has carried out �7 363 checks of employers, from witch in

976checkstheoffencesweredetected,including:

- In47�casesor48%fromsalariesofemployeesthetaxeswerecalculatedand

paidimproperly;


Numberofthematicchecksanddetectedviolationstherein

�9880

�0676

23372

�3727

330�2

�3943

33�99

947�

0

5000

�0000

�5000

20000

25000

Detectedviolations

Checks

30000

35000

2002.g. 2003.g. 2004.g. 2005.g.

27


- In200casesor20%theworkcontractswithemployeeswerenotconcluded.

On offences of employers detected in the thematic checks in 364 cases the

penaltywasapplied inamountof45,8 thousandof Ls, aswell as42warningson

terminationofeconomicactivitywereexpressed,butinonecasetheeconomicactivity

wasterminatedinaccordancewiththeCodeofAdministrativeoffencesinLatvia.

Inchecksofemployersalsoothercontrolstateinstitutionshasbeeninvolved.In

2005SRShascarriedoutthechecksofemployersinco-operationwithStateLabour

Inspection (6�2 thematic checks,effectiveness–��%),withEconomicPolice (46�

thematic checks, effectiveness–3%)andwithState Police (�78 thematic checks,

effectiveness–7%).

Checks of accountingFrom��398checksofaccountingofcompaniescarriedoutbySRS,in4863cases

or43%accountingincompanieshasnotbeenorganisedaccordingtolegalprovisions.

Forthesedetectedoffencesthepenaltyin�894caseswasappliedinaccordancewith

theCodeofAdministrativeoffencesinLatviainamountof204,7thousandofLs.

Checks of retail trade In2005SRShascarriedout�0236thematicchecks,fromwhichtheoffences

detectedin67�0casesor66%.Inthesechecksmostlytheoffencesrelatedtoviolation

ofprocedureofcirculationofgoodsaccountingandwaybills(in2908casesor43%),

non-registeringofrevenues(in693casesor�0%),aswellastheoffencesrelatedto

theuseofcashregistershasbeendetected.

Ondetectedoffencesinchecksofretailtradein43�8casesinaccordancewith

theCodeofAdministrativeoffences inLatviathepenaltywasapplied inamountof

250,0thousandofLs.

Checks related to draw up and use of waybillIn2005SRShascarriedout the5847checksrelated todrawupanduseof

waybills,fromwitchoffenceshavebeendetectedin232�casesor40%.Mostlythe

offencesweretheviolationofdrawupofwaybills–�233casesandviolationofpro-

cedureofaccountinganddepositofwaybills–668cases.

28

Inspection of taxpayers

In2005SRSconducted�5420inspectionsof��98�taxpayers,fromwhich:

- 26�4inspectionsoftaxpayerswereconductedwhohavetaxarrears;

- 2�39inspectionsoftaxpayerswereconductedwhohadrequestedrefundofthe

overpaidVAT;

- �049inspectionsoftaxpayerswereconductedwhodonotobservethediscipline

forsubmittingofreportsordeclarations;

- 3303inspectionsconductedaftertherequestofanotherSRSstructuralunit;

- 345inspectionsconductedaftertheinformationgivenbythethirdparty;

- 259inspectionswereco-ordinatedbytheSRSExciseGoodsDepartment;

- 57��inspectionsconductedduetootherreasons.

Supervision of economic activity

In2005theSRShasperformed3�8observationsofbusinessactivitiesof�73

taxpayersincluding��5legalpersonsand58naturalpersons.Mostobservations–58

%fromalltheobservedlegalpersons–wereperformedontaxpayerswhosebasic

activityistrade,�4%-manufacturingenterprises,5%-taxpayersinvolvedintimber

business,5%-constructioncompaniesand�8%onothertaxpayers.

Tax refunds

- Alongsidewiththe increasingrevenueofVATtheamountof theoverpaidVAT

hasalsoincreased.AmountoftheoverpaidVATasonJanuary�,2006is2�3,90

mill.Lats,whichis56,85mill.Latsor36,2%morethanonJanuary�,2005.

Increaseoftheoverpaidsumwasdeterminedbytheincreasingexternaltrade

aswellasthegrowingextentofconstructioninthecountry.Alongsidewiththe

increasingoverpayment,theamountofVATrefundisincreasingaswell.Thesum

ispaidintothetaxpayerbankaccountsorusedforpaymentofothertaxes.In

2005288,86mill.LatswererefundedasanoverpaidVATrefundandpaidintothe

bankaccountsoftaxpayersorusedforcoveringofothertaxpayments,whichis


29


50,74mill.Latsor2�,3%morethanin2004.Basedonrequestsforrefundof

theoverpaidVATtherewere27899credibilitychecksperformed.In2005there

weredecisionsadoptedtodenytherefundoftheoverpaidVATintheamountof

�6,6mill.Latsor5,5%fromtherequestedamount.

- In2005SRShasreceived30claimsfortherefundofexcisetaxintheamount

of430,�thous.Latsfromenterprises,whichusethefuelforheatingpurposes.

During the verification of refund claims 3 violations were established that reduced

therefundby8,4thous.Lats.In2005refundstotaxpayersusingfuelforheating

purposesweredisbursedinthetotalamountof408,5thous.Lats.

- In2005theSRSreceived�60764incomedeclarationsclaimingrefundofpersonal

income tax in conformity with attachments on justified expenses (on medicine

andeducation).�53�76declarationsor95%ofallsubmitteddeclarationswere

verified, and in 13 208 declarations delinquencies were established accordingly

reducing the amount of refund by 255,5 thous. Lats. In personal income tax

declarations submitted for year 2004 the amount of justified expenses was 32,65

mill.Lats.Initsturntherefundedamountwas22,34mill.Lats,whichis5,58

mill.Latsofrefundableamountintheformofpersonalincometax.Furthermore

58526incomedeclarationsweresubmittedwheretheincometaxwasreduced.

After the examination of these declarations delinquencieswere established in

3952declarationsandasa result of this refundof personal income taxwas

reduced by 58,3 thous. Lats. Altogether in 2005 the SRS has refunded 8,24

mill.Latsbasedontheinformationprovidedbythetaxpayersinannualincome

declarationsaboutreductionofthepersonalincometax.Itis�,42mill.Latsor

20,8%morethanin2004.

- In 2005 2 727 applications were submitted about the refund of enterprise

income tax in the amount of 9,5 mill. Lats. In order to verify the validity of

the overpayment of enterprise income tax 2 2�5 inspections were conducted

anddelinquencieswereestablished in206cases.Intotal9,49mill.Latswere

paidintobankaccountsoftaxpayersorusedforthepaymentofothertaxesas

enterpriseincometaxrefundin2005.

- In 2005 SRS has received 23 623 applications from producers of agricultural

goodsabouttherefundofexcisetaxforpurchasedfuelintheamountof��,6

mill. Lats. After inspecting the validity of the tax refund delinquencies were

30

establishedin2�5�cases.Hencetheexcisetaxrefundwasreducedby346,9

thous.Lats.Theamountofrefundedexcisetaxtoproducersofagriculturalgoods

forthepurchasedderv(gasoil)hasincreasedby28,4%in2005comparedwith

2004(8,93mill.Latsin2004,��,47mill.Latsin2005).Initsturntheamountof

requestsforexcisetaxrefund(inhectares)totheproducersofagriculturalgoods

forpurchasedderv(gasoil)hasdecreasedby0,2%in2005comparingto2004

(7��642hectaresin2004,7�0��9hectaresin2005).

Administrative Co-operation and exchange of information

In order to strengthen combat against tax avoidance and timely detect tax

fraud cases the system of information exchange and administrative Co-operation

withothergovernmentinstitutionsandprofessionalorganisations,andalsowithtax

administrationsofotherstateshasbeenimproved.

Amongtheprioritiesininternationalexchangeofinformationmostimportantis

theexchangeofinformationintheareaofdirecttaxesbetweenRepublicofLatviaand

memberstatesofEuropeanUnionaccordingtotheJune3,2003,CouncilDirective

2003/48/EKconcerningtaxationofinterestincomefromsavingsaswellasDecember

�9,�997CouncilDirective77/799/EEKconcerningmutualassistancebythecompetent

authorities of the Member States in the field of direct taxation and taxation of insurance

premiumsandalsocontractingcountrieswithwhomRepublicofLatviahasconcluded

internationalagreementsaboutpreventionofdoubletaxationandtaxevasion.Currently

exchangeofinformationtakesplaceinaccordancewithtaxconventions(currently38

taxconventionsinforce),contractsonmutualadministrativeassistanceandautomatic

information exchange, as well as spontaneous exchange of information within the

frameworkofcontract.Currentlycontractsonmutualadministrativeassistancehave

beenconcludedwithtaxadministrationsofSweden,Lithuania,DenmarkandFinland

Ministry of Finance. A contract on spontaneous exchange of information has been

concludedwithtaxadministrationofNetherlands.

In2005informationexchangewithvariousstatetaxadministrationsinthearea

ofdirecttaxationwasaccomplished5�3casesandwithintheframeworkofautomatic

informationexchangeinformationabout��000personswasreceived.

In2005intheareaofVAT482requestsofinformation(SCACforms)hasbeen


3�


sent to other member states of European Union, �64 replays have been sent to

requestsofothermembersofEuropeanUnion,fromothermemberstatesofEuropean

Union�89requestsofinformationand44�repliestoinformationrequestshavebeen

received, processed and sent to SRS territorial offices. In 2004 within the framework

oftaxtreatiesinformationexchange855informationexchangerequestswerereceived

and855informationrequestsweresentandalsoco-ordinationandprocessingintax

collectioncaseswasperformed,butcorrespondenceinissuesofinformationcollection

withdepartmentsamountedtoaboutof�800requests.

Intheareaofexcisetaxes809repliesweresenttoinstitutionsofEuropeanUnion

taxadministrations,taxpayersofLatviaetc.aboutinformationregisteredinLatvia’s

“SEED”registeraswellasregularexchangeofinformationwasperformedinthearea

ofexcisetaxeswithmembersoftaxadministrationsfromotherstatesofEuropean

UnionwithintheframeworkofproceduressetbyEuropeanCommunity.389excise

earlywarning(EWSE)reportsweresentand440werereceived,58requestsofexcise

goods movement verification system (MVS) were sent and 53 were received.

32

ThemaintasksoftheSRSintheareaofcustomsaretoensuretheimplementation

ofcommoncustomspolicyof theEuropeanUnion, tocollect taxes, feesandother

mandatorypaymentsintothebudgetofLatviaandtheEuropeanUnion,tocontrolthe

compliancewiththelegalprovisionsoncustomsmatters,toensurecorrectapplication

ofcustomsregulationsandequalattitudetoallcustomers,thuspromotinginternational

trade.ThestructuralunitsoftheSRSwithinwhosecompetencyistheimplementation

of customs policy – the SRS National Customs Board, the SRS Customs Criminal

Board, the SRS Rīga Customs Regional Office and the SRS territorial offices’ Customs

Departments(furtherinthetext–theLatvia’sCustomsService),inco-operationwith

otherpublicauthoritiesbystoppingthesmuggledgoodsonborderandpreventingthe

importandexportof conventionallyprohibitedcommodities,promotepublichealth

andsecurityaswellasprotectthemarket.

TheSRSprioritiesfortheyear2005intheareaofimplementationofcustoms

policy were determined in conformity with the main strategic objectives specified

withintheareaofcustomspolicyimplementation:

- Toprotectthepublic,economyandenvironmentbypreventinganddisclosingthe

offencesagainstcustomslegislationandthecriminaloffences;

- Toimprovetheinternationaltradeenvironment;

- Tocalculatecorrectlyandtocollectthecustomspaymentsdue;

- Toensureeffectiveoperationofcustomsservice.

Bysuccessfuloperationsin2005paralleltocustomsservicesofotherEUmember

states,theSRScustomsstructuralunitshaveprovedtheirstabilityandprofessional

capacity,ensuringfreeIntra-Communitymovementofgoodsandprovidingcustoms

controlontheexternalborderoftheEU.SinceLatvia’saccessiontotheEUtheSRS

customsstructuralunitshavemadetheir input intothecommonbudgetoftheEU,

transferring75%fromthecalculatedtotalamountofTraditionalOwnResourcesinto

thebudgetoftheEuropeanUnion.In2005theSRShadextremelygoodresultsinthe

areaofcustomscontrolandprotectionof intellectualpropertyrights.Besidesthat,

awhole rangeofactivitieswere carriedout to improve thebusinessenvironment,

improving the co-operation with traders, providing them with a variety of various

simplifications and relieves of customs clearance procedure, correctly applying the

CUSTOMS ACTIVITIES

33

CUSTOMS ACTIVITIES

provisionsoftheexistinglegislation,implementingnewandmodernisingtheexisting

customsinformationsystemsandimprovingthecontrolpostfacilitiesandclientservice

halls.

Fulfilment of the plan of revenues collected by the SRS customs structural

units

Tax typeRevenues (thous.Ls)

Increase or decrease

(2005 -2004)

2004 2005 (thous. Ls) %

Value Added Tax releasing goods

forfreecirculation

288374,56 �86696,57 -�0�677,99 -35,2%

Excise taxon import for free cir-

culation

�3�684,9 �94��,93 -��2272,97 -85,3%

Customstax �7�46,8 �9246,82 2�00,� �2,2%

Paid in state budget in total 437 206,26 225 355,32 -211 850,94 -48,5 %

WhentheRepublicofLatviaaccessedtheEuropeanUnion,theamountofthevalue

addedtaxcollectedbytheSRScustomsstructuralunitsonreleaseofgoodsforfree

circulationwasconsiderablyreduced.BeginningwithJanuary�,2005theprocedureof

excisetaxadministrationandaccountingwaschanged,providingthatfromthatdate

ontheSRSExciseGoodsDepartmentisresponsiblefortheexcisetaxadministration

andaccounting.AsbeforetheJanuary�,2005theadministrationofexcisetaxforoil

products–thecollection,accountingandcontrol–wastheresponsibilityoftheSRS

NationalCustomsBoard,partofthebusinessesalreadyhadpaidtheexcisetaxdue

intotheaccountsadministeredbytheNationalCustomsBoard,sotheseamountshad

to be returned back, and this is the reason for the negative figures in the table for the

excisetaxcollection.

34

Administration of Traditional Own Resources

By the accession to the European Union Latvia confirmed its readiness to participate

in financing of the EU budget. One of the sources to finance the European Union’s

budgetistheso-calledOwnResources,includingtheTraditionalOwnResources.The

partoftheEuropeanUnion’sTraditionalOwnResourcesthatiscollectedbycustoms

offices, is created by the following:

- Customstax(appliedtogoodsimportedfromthirdcountries);

- Agriculturalpayments(paymentsthathavebeenintroducedinconformitywith

thecommonagriculturalpolicy);

- The final anti-dumping payment (payments that are applied to goods imported

intotheterritoryoftheEUwithdumpingprices);

- Finalcompensationpayment(paymentsthatareappliedtogoodsimportedinto

theterritoryoftheEUandfortheproduction,transfer,processingandexportof

whichhavebeengranteddirectorindirectsubsidies).

The SRS National Customs Board is responsible for the accounting of the

TraditionalOwnResourcesandtheircontrolinconformitywiththeprovisionsofthe

EUlegislation,thesocalledA”and„B”accountsprinciple.Onthebasisofthemonthly

reporton„A”accountpreparedbytheSRSNationalCustomsBoard,theMinistryof

FinancepreparesapaymentorderandforwardsittotheStateTreasurytomakethe

transferintotheEUbudget.AccordingtothelegalprovisionsoftheEuropeanUnion

themember state retains25% from the calculatedamountof theTraditionalOwn

Resourcestocoverthecostsoftheircollection.

CUSTOMS ACTIVITIES

35

CUSTOMS ACTIVITIES

Payments into the account of the European Account of the Bank of Latvia

Reporting period Period of draw-

ing the report

and transferring

the resources

The amount

transferred into

the European

Account of the

Bank of Latvia

(Ls) for the re-

spective period

of 2004

The amount

transferred into

the European

Account of the

Bank of Latvia

(Ls) for the re-

spective period

of 2005

Increase in

comparison with

2004 (%)

January March - 872685 -

February April - �224645 -

March May - �289570 -

April June - �442046 -

May July 786268 ��53�73 47

June August 650539 940820 45

July September 86304� 963546 �2

August October 930602 �306�03 40

September November 946804 ��52373 22

October December �053409 �54890� 47

November January �050436 �368656 30

December February �227048 �503330 23

Total: 7 508 147 14 765 848

36

The results of control activities in customs

Customs audits

ToensureeffectiveSRSoperationinthe

implementationof customspolicy, to check

the correctness of filling in the declarations

and to reduce the time needed for the

clearanceofgoods, theSRSmakes control

activities after the clearance of goods also.

In 2005 the SRS has made 72� customs

audits, from them 98 were customs audits

ofcompaniesand623werecustomsaudits

oftransactions.Duringtheseauditsin9�%

ofthemoffencesagainstcustomsregulations

werediscovered.Intheresultoftheauditsin

2005theSRShasassessedcustomsdebt,arrearsofothertaxesadministeredbycustoms

offices and penalty in total for 6,5 million Ls. If compared with the results of the previous

–2004year,theamountassessedintheresultofcustomsauditshasincreasedby�3%.

Physical control

To ensure the compliance with customs regulations, the SRS officials at customs

controlpostschecktheaccompanyingdocumentsandselectfreightsforphysicalcontrols.

In case if customs offences are discovered, in 2005 the SRS officials have issued 1 282

noticesofadministrativeoffences,asaresultofwhatinconformitywiththeCodeof

AdministrativeOffencesofLatviaforviolationofcustomsregulationslegalandnatural

personsweregivenpenaltiesforintotal�37,4thous.Ls.

Themaintypicaladministrativeoffences:

- importationofnon-declaredgoodshidingtheminprivateluggageandpersonal

cars(non-declaredgoodsaremainlyimportedbyprivatepersons);

- Goodsmostfrequentlyimportedwithoutdeclaringaresmallamountsofcigarettes

andalcoholicbeverages,aswellassugaranditemsofeverydayuse;

CUSTOMS ACTIVITIES

Dynamicsofthecustomsdebt,othertaxesadministredbycustomsofficesandpenalties,

assessedbytheSRS(millionLs)

2.38

5.736.48

0

�

2

3

4

5

6

7

2003.g. 2004.g. 2005.g.

37

CUSTOMS ACTIVITIES

- Fuelismainlyimportedinadditionalspeciallymountedfueltankers,aswellasin

fueltankardshiddeninthepassengercompartmentorluggagecompartmentof

transportvehicles;

- The documents presented to customs offices contain false information – in

accompanyingdocuments incorrect commodity codesare stated, thevalueor

weightofthegoodsisincorrect.

Protection of intellectual propertyWithin the activities on protection of

intellectualrights,in2005theSRShasreceived

the applications of 230 legal subjects with

requests to protect intellectual property, from

them in �46 cases the requests were about

the protection of the European Community

trademarks,designsamplesandplantspecies.

In 2005 the SRS officials during control

activitiesoncustomsmattersin��9caseshave

detained pirate goods or goods with falsified

brandmarks,orcounterfeitgoods.Ifcomparedwiththepreviousyearsthenumberof

caseswhencounterfeitgoodsweredetainedhasconsiderablyincreased,andthatcan

beexplainedbothbyimprovementofcustomsactivitiesandbyincreaseoftheamount

of falsified goods transported.

NumberofAdministrativeoffences'statementsissuedbytheSRSonoffences

againstcustomsregulations

2530

�780�282

0

500

�000

�500

2000

2500

3000

2003.g. 2004.g. 2005.g.

DynamicsofpenaltiesissuedbytheSRSforviolationofcustoms

regulations(thous.Ls)

�92.�2�8.0

�37.4

0.0

50.0

�00.0

�50.0

200.0

250.0

2003.g. 2004.g. 2005.g.

DynamicsofcounterfeitgoodsseizedbytheSRS

�938

��9

0

20

40

60

80

�00

�20

2003.g. 2004.g. 2005.g.

38

Intotalin2005�5906�unitsofcounterfeitgoodsweredetained,withthetotal

valueappr.5,�millionLs.Intotalin2005thepenaltiesappliedforviolationoflegal

provisionsonintellectualpropertyrightshavebeenissuedfor�7400Ls.

Mostfrequentlydetainedcounterfeitgoodsareclothesandfootwear,pirateCDs

withmusic,andsparepartsofpersonalcarsAudi,FordandBMW.Besidesthat,the

falsifiers prefer to sell goods of cosmetics and perfumery labelled with brand marks

of“Lancôme”and“D&G”,aswellasaccessoriesof“Nokia”mobilephones.Clothes

andfootwearmostfrequentlyarelabelledwithfalsebrandlabelsof“Nike”,“Adidas”,

“Reebok”, “Umbro” and “Puma”. In majority of cases the freights with falsified goods

cometoLatviafromEastAsiaandtheirenddestinationmostoftenisthecountriesof

theUnionofIndependentCountries.

Combating of drug smugglingInphysicalcontrolsoffreight,luggageandregularmaildeliveriestheSRSdog

handlerswithspeciallytraineddogsparticipateonregularbasis.Comparingwith2004,

whentheSRSdoghandlersdetainednarcoticsubstancesinfourcases,in2005the

SRSdoghandlersdetainednarcoticsubstancesin3�case.Intotalwiththeassistance

ofthedogsthereweredetainedin2005:

- marijuana–�3,4g;

- hashish–�7,6268g;

- methadone–0,3g;

- poppystraw–4�5g;

- psychotropicsubstances-0,300�5g.

In co-operation with the State Police and the Department of Imprisonment

Facilitiesweredetained:

- marijuana–8,0095g;

- cocaine–0,2�54g;

- psychotropicsubstances–299,934g.

Inadditiontotheactivitiesofdoghandlersintheareaofcombatingsmugglingof

narcotic substances, the SRS officials without the assistance of the trained dogs in the

resultofcustomscontrolactivitiesin3caseshavedetainednarcoticsubstances:

- marijuana–3,4023g;

- hashish–9,6947g;

CUSTOMS ACTIVITIES

39

CUSTOMS ACTIVITIES

- MDMA–0,03g;

- methandienon–9990tablets.

Control of the goods of strategic importance and dual usageAccording to the definition given by the Law on circulation of goods of strategic

importancethegoodsofstrategicimportancearesystems,equipment,partsofthem,

materials,chemicalsubstances,objects,softwareandtechnologies,thatareincluded

inthe listsofgoodsofstrategic importanceapprovedbytheCommitteeofControl

ofStrategic ImportanceGoods,or inotherwords– thesearegoods,softwareand

technologiesincluded,thatcanbeusedbothforcivilandmilitarypurposes,andto

whichallthosegoodsbelongthatcanbeusedbothforcivilobjectivesandformilitary

objectivesandforproductionofnuclearweaponsandothertypeofnuclearexplosive

devices production. For transfer of these goods it is necessary to have specific licences

thatareissuedbytheCommitteeofControlofStrategicImportanceGoods.

In2005theSRShasissuedsixadministrativeoffencestatementsonviolation

oftheregulationsonmovementofgoodsofstrategicimportanceandofdualusage,

andincaseofoneoftheseadministrativeoffencesapenaltywasdeterminedatthe

sizeof6thous.Ls,in5casesthecaseswereclosed.Withintheadministrativecases

thereweredetainedfourfreighthauliers,foursemi-trailers,2355kgpartsofbattle

weaponsand5�unitofpneumaticweapons.

Movement control of conventionally protected goodsOncustomscontroloftheluggageincustomspostsofRigaInternationalAirport,

passenger ports and other customs control posts the SRS officials discover items the

movementofwhichacrossthebordersforprivateneedsisregulatedbytheWashington

convention„TheConventioninInternationalTradeinEndangeredSpeciesofWildFauna

andFlora”–CITES,andit ispossibleonlywithaCITESpermitandthemandatory

veterinarian or fito-sanitary permits.

In 2005 the SRS officials have discovered 12 offences against the Washington

convention„TheConventioninInternationalTradeinEndangeredSpeciesofWildFauna

andFlora”–CITES,asaresultofwhatthepenaltyappliedhasbeenfortheamountof

499 Ls. In the result of the disclosed offences the items of 25 species were confiscated

fromnaturalpersons:

40

- fragmentsofcoralcolony–�4pieces.;

- shells–4pieces;

- bootsofpython’shide–4pairs;

- bagofcrocodile’shide–�piece.;

- purseofmonitor’slizardskin–�piece.;

- turtleshell–�piece.

CUSTOMS ACTIVITIES

Pythonleatherboots

SouvenirsmadefromprotectedspeciescorralsPocilloporasp.andFungiasp

ProtectedspeciesStrombusgigasshell

ProtectedturtlespeciesCheloniidaespp.shell

4�

CUSTOMS ACTIVITIES

Investigation of criminal procedures on customs offences

The investigation of criminal

procedures and operational activities

to discover and prevent criminal

offences on customs matters is the

responsibility of the SRS Customs

Criminal Board. The priorities of the

actions of the SRS Customs Criminal

Boardin2005werecombatingofdrug

smugglingandorganisedcrime.

TheSRSCustomsCriminalBoard

in2005intotalhasevoked79criminal

procedures,thisbeingnearlytwotimes

more than in2004.Numberof cases

sentforcriminalprosecutionwas32,andthisisby�3casesorby4�%morethanin

2004.OnDecember3�,2005theSRSCustomsCriminalBoardwasworkingwith�49

criminalprocedures.

In 2005 several cases of illegal transfer and storingwere discovered.On the

discovered criminal offences there were evoked five criminal procedures, and from

them three have been sent to the prosecutor’s office to evoke criminal persecution.

Withinthesaidcriminalprocessestherehavebeenseized:

- 6,7millioncigarettesofvariousbrands;

- 36tonsoftobacco;

- Threesetsofequipmentforproducingcigarettesinthevalueof��00000USD,

766750EURand3300Ls.

Atthebeginningof2005theSRSCustomsCriminalBoardhasmoreintensively

organisedoperationalcontrolsrelatedtopotentialoffencesinthebranchofmeatpro-

cessing.IntheresultoftheundertakencontrolsanewVATrefundfraudschemehas

beendiscoveredandstopped.Intheareaoforganisedcrimecombatingin2005the

SRS customs offices have stopped or caused substantial inconveniences for the activi-

TheresultsoftheSRSCustomsCriminalBoardininvestigationofcriminalprocedures

Numberofcriminalproceduresevoked

Numberofcriminalprocessessenttoevokecriminalpersecution

29

��

4�

�9

79

32

0

�0

20

30

40

50

60

70

80

2003.g. 2004.g. 2005.g.

42

tiesofsevenorganisedgroups.Theactivitiesofthesegroupsweremainlyrelatedto

smugglingofnarcoticsubstancesaswellascigarettesandtobacco,andtoproduction

ofcigarettes.Thevalueofgoodsseizedfromthecriminalgroupswas�535000Ls.

Themostimportantcriminalprocessesevokedin2005werethefollowing:

- AttheendofFebruary2005theSRSCustomsCriminalBoardinitiatedacriminal

caseonalarge-scalefraud,havingresultedinlossesforthestateattheamount

ofappr.0,7millionLs.Thefraudulentactivitieswereperformedbyacompany

thatwithintheperiodfromSeptember2003tillDecember2004soldITsoftware

to two offshore companies, artificially seven times increasing the value of the

goods;

- At the middle of September 2005 the SRS Customs Criminal Board has sent

for initiation of a criminal prosecution a criminal case on the abuse of official’s

position by two SRS officials. One SRS official had knowingly supported large

CUSTOMS ACTIVITIES

�,8millioncigarettesdetectedintheloadofnewsprintpaper

2,9millioncigarettesdetectedintheambushmadeincardboard

43

CUSTOMS ACTIVITIES

scale tax refund fraud, the other official – had been negligent towards the official

job responsibilities – filling in and clearing the customs declarations for several

non-existingexport freightsofacompany registered inLatviaat thevalueof

77,0 thousandLs, falsifying thedocuments.Within the frameworkof thesaid

criminalprosecutionithasbeenrequestedtoinitiatecriminalpersecutionoftwo

entrepreneurs;

- At thebeginningofOctober2005thepersonnelof theSRSCustomsCriminal

Boardwentforcontrolonthevessel“Nauta”.ItwasdiscoveredthatonOctober

10, 2005 via Liepāja customs control post without declaring and by use of falsified

customs documents �50 tons of sugar were imported into the state. On the

detectedoffencethecriminalprocedurewasinitiated,andinDecember2005it

wasforwardedforinitiatingacriminalprosecution;

- AttheendofOctober2005theSRSCustomsCriminalBoardaskedtheProsecutor’s

Office for Customs Matters to evoke criminal persecution on a criminal case where

the investigation was on-going for nearly five years. The criminal case was evoked

against several tensofSRS,BorderGuards andSanitaryBorder Inspectorate

officials on supporting and concealing the fact of meat smuggling, malevolent

useofservicepositionandinactivity,havingresultedinheavyconsequencesand

substantiallossesforthestate.

�50tonnsofcugartakenoutofcirculationwithintheframeworkofcriminalprocedure

44

Investigation of criminal processes on smuggling of narcotic and

psychotropic substances

The number of discovered cases of drug smuggling in 2005 is the biggest in

thehistoryof customs. In total in2005 in theSRSCustomsCriminalBoard there

havebeenevoked23criminalproceduresonsmugglingofnarcoticandpsychotropic

substances,thisbeingby�6criminalproceduresmorethanin2004.Theevokingof

criminalprosecutionhasbeenrequestedin�7criminalproceduresonsmugglingof

narcoticandpsychotropicsubstances.

The amounts of narcotic and psychotropic substances seized within the crim-

inal proceduresName of the narcotic and psychotropic substance 2004 2005

Hashish 2,2�46grams 34,9grams

Cocaine 0,0�gram ��6,4grams

Marijuana 20,6grams �3,4grams

Poppystraw 360grams 5435grams

Leavesofcoketree �6,9�25grams -

Diazepam 75tabl.and�0,5amp. -

Codeine 87tabl. �9,2grams

Morphine 5amp. -

Pharmaceuticals containing narcotic and psychotropic

substances

435tabl.and40apm. -

Non-declaredPharmaceuticals 28�tabl.and360amp. -

Ephedrine - 9002grams

MDMA„ecstasy” - 399�,58grams

Metamfetamin - �044,�gram

Amphetamine - 5�,�5grams

Fenazepam - �2,5grams

Phenobarbital - 24grams

Mostimportantcriminalcases/criminalproceduresdiscoveredin2005:

- InMarch2005thepersonneloftheSRSCustomsCriminalBoardinco-operation

withtherepresentativesofStatePoliceinGulbeneregiondiscoveredalaboratory

producingsyntheticnarcoticsubstance-methadone(substituteofheroin);

CUSTOMS ACTIVITIES

45

CUSTOMS ACTIVITIES

- OnApril2005thepersonneloftheSRSCustomsCriminalBoarddiscoveredthe

largestamountinthehistoryofthecustoms–morethanninekg(9002grams)

ofephedrine, thatwashidden ina freightof clothesand footwear, containing

counterfeitgoodsalso,importedfromBulgaria;

- OnApril2005thepersonneloftheSRSCustomsCriminalBoardinco-operation

with the personnel of Rīga city Central Criminal Police Department stopped the

operationsofdrugsmugglingchannelfromWestEuropeancountriestoLatvia.In

theresultoftheco-operationtheshipmentofnarcoticsubstanceMDMA“ecstasy”

tabletswasseized–nearlyfourkg(3989,5088grams);

- OnOctoberandNovember2005thepersonneloftheSRSCustomsCriminalBoard

in co-operationwith theStatePoliceOrganisedCrimeCombatingDepartment

andcolleaguesofLithuanianCriminalPoliceDepartmentstoppedtheactivitiesof

twochannelsofsmugglingnarcoticsubstancesfromLithuania.

Ephedrinedetectedintheloadofclothingandfootwear

Loadof„Extasy”drugs

46

Trade facilitation

In 2005more than 800 tariff quotaswere available to the traders, providing

the possibility to import the specific goods from the third countries with reduced or

zerorateofcustomstariff.During2005840tariffquotaapplicationswerereceived,

controlledandprocessed,and in827casesthequotasweregrantedat thesizeof

100 %. Most frequently asked for were tariff quotas for foodstuff import – fish and

fish products from Norway, Russia and Thailand, wines from Bulgaria and Romania,

instantcoffeefromUSAandBrazil.Byuseoftariffquotastherewereimportedinto

Latvia appr. 2 282 tons of fish and their products, 1 110 742 litres of wine, 570 tons

oforanges,3�5tonsofcoffee.

Improvement of operational quality

Introduction and improvement of information systemsTheuseofmoderninformationsystemsisofgreatimportancefortheimprovement

ofoperationalqualityofcustomsmatters,andforthisreasontheSRSonregularbasis

implementsnewinformationsystemsandimprovestheexistingones.In2005anew

computerised transit system (NCTS) implementation was finished. On July 21, 2005

LatviajoinedthoseEuropeanUnionstatesthathaveintroducedelectronicGuaranty

Management System (GMS). This system provides the possibility for customs offices

tomakeelectroniccontrolsthevalidityanduseoftransitguaranties,thusreducing

theriskofsmugglingandthepossibilitytocauselossestothestatebudget.Forthe

CUSTOMS ACTIVITIES

Metamphetamine

47

CUSTOMS ACTIVITIES

tradersthenewsystemprovidesthepossibilitytoreducetheformalitiesofcontrolsof

guaranty’sadequacy,thussimplifyingthebeginningoftransitprocedureinalltheEU

countrieswherethesystemalreadyisinoperation.

The optimisation process of customs control posts and facilitation of quality of services provided.

In 2005 several client service halls were developed – in the renovated SRS

Rīga Customs Regional Office building in Citadeles street 1 and in merged customs

control posts in Buļļu street 74 and Uriekstes street 3. Besides that, four new, modern

customscontrolposts,orientedtowardstheconveniencefortheclients,(further in

the text – CCP) in conformity with the EU requirements are developed − Rīga Freeport

CCP, Daugavpils Freight Terminal CCP, Rēzekne Freight Terminal CCP and Ventspils

Trade Port CCP. In 2005 the construction of a customs control post in Šķirotava railway

stationhasbeenstarted.

OneofthemaintasksaftertheaccessionoftheEuropeanUnionistheimplementation

ofahighqualityandsecurebordercontrolontheexternalborderoftheEU,meaning.

suchacontrolthatbothpeopleandgoodswouldbecontrolledinconformitywithall

the requirements. To ensure the possibility for freight to cross the borders via the

borderposts,thoseborderpostsshallbeinconformitywiththerequirementssetby

theEU.ForLatviatobeabletocomplywiththeserequirements,since�995theState

InvestmentProgramProjectisbeingimplemented–„OP03Customspostsonborders”.

The financial resources for the project are granted from the state budget. Within the

saidprojectin2005theprojectofrailwaycarriageweighingforcustomscontrolpost

“Šķirotava”. The railway weighs are planned to provide the SRS customs officers with a

possibilitytoweighthecarriagesofatrainduringthecustomscontrolwiththepurpose

todeterminethecustomsvalueofthecommoditiesandtocalculatecustomstax,thatis

oneofessentialcontrolactivitiesofcustoms.In2005theplanningofascaffoldbridge

for oil product control in Rēzekne CCP was finished. The scaffold bridge is necessary to

provide the possibility for a customs official to make customs control in compliance with

jobsecurityrequirements–totakesamplesofoilproducts,chemicalsubstancesand

othersamplesfromthetankersandotherreservoirsofatrain.

ForsupplyofservicestobusinessmenandnaturalpersonsintheSRSterritorial

customs offices in 2005 two customs posts have been merged, thus creating a single

48

merged customs control post 0265. In customs control post in Rīga Free Port an

electronicqueueaccountingsystemhasbeeninstalledtoensurefairsupplyofservices

to the freight hauliers in regular sequence, eliminates any possibility for potential

suspicions and disputes among the freight hauliers about the services supplied to

personsoutofthequeue,andprovidesapossibilitytomeasurethetimeofsupplyof

services.

Taking intoaccount the fact thatwithLatvia’saccession to theEU theborder

with theRepublicof Lithuaniaand theRepublicofEstoniahasbecomean internal

border of theEU, and that there is freemovement of goods across theseborders

without customs control, in 2005 the following customs control post buildings and

infrastructureswereforwardedtotheBorderGuards:

- MeiteneCCP;

- Grenctāle CCP;

- Ainaži CCP;

- ValkaCCP;

- VeclaiceneCCP;

- RucavaCCP;

- SubateCCP;

- MedumiCCP.

Most important customs projects implemented and started in 2005: - Within the framework of the European Union Phare project

No.2002/000-590-��-0�“StrengtheningofCustomsadministrativecapacityby

implementationofmutually compatible customs strategyandEuropeanUnion

databases” there were ongoing activities to develop, implement and test the final

versionoftheIntegratedTariffManagementSystem(furtherinthetext–ITMS).

The implementation of ITMS will be finished in 2006.

- Inco-operationwithEuropeanIntegrationandEconomicDevelopmentAgencyin

AustriaPhare2003TwinningLightprojectNo.LV/03/IB/FI/02-TL“Improvement

ofpost-importationcontrols”hasbeenimplementedwheretheLatvia’ssystem

of post-importation controls was evaluated, including the organisational

structure, methodological instructions and risk management technique, and

recommendationsweregivenforitsimprovement.

CUSTOMS ACTIVITIES

49

CUSTOMS ACTIVITIES

- On November 7, 2005 the co-operation agreement was signed with Swedish

CustomswithinthePhare2003projectNo.LV/2003/IB/FI-08TL“Improvementof

CustomsAnalyticalactivities”withtheobjectivetodevelopcustomsanalysisand

toensureeffectiveriskmanagement,toenhancethedisclosure,combatingand

preventionofviolationsofcustomsregulationsoninternalandexternalborders

oftheEuropeanUnion.

- Active participation has been started in “Customs 2007” exchange program,

contacts have been established with the Exchange co-ordinators of customs

servicesofothercountries.Withinthesaidprogramtheexchangeofexperience

hasalreadybeen in theareaofdoghandlers,physical controls, inworkwith

x-rayscanners,onprotectionofintellectualpropertyrightsandonimplementation

anduseofElectroniccontrolsystemofguaranties.

- WithintheEuropeanUnionPhareprojectNo.2003/004-979-08-0�“Integrated

tariff management system and risk assessment” on April 5, 2005 a bilateral

Twinning Agreement has been concluded, and the requirement specifications are

developedforRiskInformationManagementSystemandforExportControlSystem,

aswellastheexpertsfromSwedenandDenmarkhaveprovidedassistanceinthe

development of the final version of ITMS, its implementation and testing. Besides

that, the state procurement procedurewas organised andService agreement

concluded for thedevelopmentofRisk InformationManagementSystem,and

the development has been already started. The system will be developed till

November30,2006.

- WithintheEuropeanUnionPhareprojectNo.2003/004-979-03-0�“Developmentof

Agriculture product market administration system” the requirement specifications

aredevelopedforDataexchangesystembetweentheStateRevenueServiceand

Rural Support Service, the state procurement procedure has been organised,

theserviceagreementisconcludedforthedevelopmentofthesystem,andthe

system’sdevelopmenthasalreadycommenced.Thesystemwillbedevelopedtill

November30,2006.

50

ThemainobjectivesofSRSFinancePolicedepartmentaretodetectandprevent

criminal offences in the sphere of state revenues and in the activities ofSRS civil

servantsandemployees,andalsotoperforminvestigationincriminalcasesoncriminal

offencesdetectedintheareaofstaterevenuesaswellasintheactivitiesofSRScivil

servantsandemployees.

SRSFinancePolicedepartmentprioritiesin2005were:

- Combatingoforganisedcrime

- Combatinglegalisationofillegallyobtainedmoneyresources

- Combatingtaxfraud

- Combatingcriminaloffencesrelatedto“envelopesalaries”

Optimisation of work

ToensurepossiblyeffectiveperformanceoftasksassignedbylawtoSRSFinance

Policedepartment,implementinginvestigationprinciplesintroducedinthenewCriminal

ProcessLawthatcameinforceonOctober�,2005,aswellasdevelopingthegeneral

organisation of work in institution in line with the experience of law enforcement

institutionsofmoredevelopedcountries,thereorganisationofresourcesandoptimisation

offunctionalperformancewasstartedinSummer2005.

Withintheframeworkofreorganisation:

- FragmentationonstructuralinvestigationworkinSRSFinancePolicedepartment

waseliminated.Nowcriminal investigation isorganised inonestructuralunitof

centraladministration;

- DivisionofFinanceintelligencewasestablishedinSRSFinancePolicedepartment,

which after the completion of structural reform will deal with financial intelligence

issuesinordertoensuremoreeffectiveperformanceofdepartmentsmaintasks;

Although theprocessof reorganisationwasnot fullyaccomplished in2005, the

resultsofperformancein2005testifyaboutpositivetendencies.

Investigation of criminal procedures

The function of SRS Finance Police department as investigation institution is

characterised by the initiated criminal procedures and detected criminal offences

COMBATING FINANCIAL CRIME

5�


(criminalcasesorcriminalproceduresforwardedtolawenforcementinstitutionsfor

initiatingofthecriminalprosecution).

Evoked and received criminal procedures/ criminal cases

Therewasanextraordinaryhighnumber

ofevokedandreceivedforfurtherinvestigation

criminal procedures (criminal cases), as well

as the amount of fixed fiscal damage therein.

In 2005SRS Finance Police department have

initiatedandreceivedfortheinvestigation76�

criminal procedures/ criminal cases in total,

which isby��7criminalprocedures/criminal

casesorby�8%morethanin2004.

2001 2002 2003 2004 2005

Evokedandreceivedcriminalpro-

cedures/criminalcasesintotal

34� 386 493 644 76�

Evokedcriminalprocedures/

criminalcases

3�0 359 465 6�5 7�3

Including:

Onthetaxevasion �02 98 �69 �98 229

Onviolationofinsolvency

regulations

��4 �58 �78 �78 20�

Onviolationofaccountancy

regulations

8 �9 4� 64 8�

Onfraud �5 30 22 4� 47

Onothercriminaloffences 7� 54 55 �34 �55

Fixedlossesinevokedcriminal

procedures/criminalcases(mil-

lionsofLs)

34,8 26,0 48,9 34,3 50,5

Receivedcriminalprocedures/

criminalcases

3� 27 28 29 48

Dynamicsofevokedandreceivedcriminalprocedures/criminalcasesinSRS

FinancePolicedepartment

34� 386

493

64476�

0

200

400

600

800

200�.g. 2003.g. 2005.g.

52

In2005splitofevokedcriminalprocedures/criminal cases inpercentageper

types of criminal offences has not changed significantly in comparison with 2004.

Namely, approximately one third - 229 (32%) criminal procedures/ criminal cases

or32%fromallevokedcriminalprocedures/criminalcaseswasevokedonthetax

evasion,20�criminalprocedures/criminalcasesor28%-onviolationofinsolvency

regulations,47%criminalprocedures/criminalcasesor7%-onfraud.

Criminal procedures/ criminal cases forwarded for evoking the

criminal persecution

TheSRSFinancePolicedepartment

haveforwardedfortheevokingofcriminal

persecution 393 criminal procedures/

criminal cases to prosecutors in 2005

which is considerably more – by �33

criminalprocedures/criminal casesor

by 5�% more than in 2004 and has

reached the highest number in the

historyofdepartment’sexistence.


Splitofcriminalprocedures/criminalcasesevokedbyFinancialPoliceDepartmentofSRSpertypesofcriminaloffencesin2005

Onothercriminaloffences�55;22%

Onfraud47;7%


regulations8�;��%

Onviolationofinsolvencyregulations20�;28%

Ontaxevasion

229;32%

Dynamicsofcriminalprocedures/criminalcasesforwardedforevokingthecriminalpersecution

�74208

220

260

393

0

50

�00

�50

200

250

300

350

400

200�.g. 2002.g. 2003.g. 2004.g. 2005.g.

53


Dynamics of criminal procedures/ criminal cases forwarded for evoking the

criminal persecution

2001 2002 2003 2004 2005

Criminalprocedures/criminal

casesforwardedforevokingthe

criminalpersecution

�74 208 220 260 393

Including:

Ontaxevasion 43 36 36 37 6�

Onviolationofinsolvency

regulations

84 �3� �36 �23 �66


regulations

8 6 25 29 47

Onfraud 4 3 � 6 ��

Onothercriminaloffences 35 32 22 65 �08

Fixedlossesincriminalproce-

dures/criminalcasesforwarded

forevokingthecriminalpersecu-

tion(millionsofLs)

2,9 7,8 2,2 5,� 36,7

Consideringprioritiesof theactivitiesof theyear2005, inthisyearespecially

intensivelyFinancePolicedepartmenthasworkedwithcriminalprocedures(criminal

cases) on tax evasion and fraud,which is seen in the results. In comparisonwith

2005therewasforwardedby65%morecriminalprocedures(criminalprocedures)for

evokingthecriminalpersecutionontaxevasionandby83%morecriminalprocedures

(criminalcases),whichhasbeenevokedonfraud.

In comparison to 2004, in 2005 considerably has increased the amount of fixed losses

incriminalprocedures(criminalcases)forwardedforevokingthecriminalpersecution–

by 3�,6 millions of Ls. In 2005 the number reached 36,7 million Latvian Lats. The

increase of fixed losses in criminal procedures (criminal cases) forwarded for evoking

thecriminalpersecutionrepresentsthepositiveresultofwork,whichhasbeenpromoted

by the utilisation of investigation resources in comply with determined priorities –

combatingoforganisedcrime,moneylaunderingandcombatingoftaxfraud.

Attheendof2005therewere980criminalprocedures(criminalcases)inthe

recordsofinvestigatorsofSRSFinancePolicedepartment,whichisby�06criminal

54

procedures(criminalcases)or�2%morethanin2004andisthehighestindicatorin

thehistoryofdepartment’sexistence.Theincreaseofcriminalprocedures(criminal

cases)intherecordsindicatestocontinuousincreasingamountofworkinSRSFinance

Policedepartment.

Other activities

SRS Finance Police department in 2005 has carried out 227 controls related

to payments of untaxedwages to employees (“envelope salaries”), non-registered

incomeincommercialsocieties,misrepresentingofaccountancydataandevasionfrom

personalincometaxandpaymentofmandatorystatesocialinsurancecontributions.

Intheresultofcontrols��2violationshavebeendetectedandin2�casesthecriminal

procedure(criminalcase)wasevokedthereof.

AsaresultofoperationalactivitiescarriedoutbySRSFinancePolicedepartment

224missing tradersweredetected inyear2005,asa result themoney resources

approximately in theamountof2,7millionsofLsweresuspended in theaccounts

ofcreditinstitutions.Withinthecriminalprocedures(criminalcases)evokedbySRS

Finance Police department (as the guarantee to possible confiscation of guilty person’s

property) 16 cars were seized, and five groupings, which have organised the tax

evasion,VAT fraud, aswell as the legalisation of illegally obtained resourceswere

detected.

Significant investigated criminal procedures (criminal cases)

InMay,2005SRSFinancePolicedepartmenthasforwardedtoprosecutor’s

office for investigation the crimes of finance and economy for evoking the

criminal persecution the criminal case on state officials tax evasionhiding of

accountancydataofdefiniteLimitedliabilitycompany(hereinafter–Ltd),where

thedamageforstatebudget in totalwas��9,45thousandLats.Carryingout

thecontrolinLtdpremises,employeesofSRSFinancePolicedepartmenthave

detected that the salaries were paid in “envelopes”. In the premises having

controlledtheapprovedlistsofsalarypaymentsandjournalsonmonthlysalary

payments,inwhichwiththesignaturesofemployeeshavebeenapprovedthe


55


unofficialsalaryreceiptinenvelopesinperiodfromthe�January,200�tillthe

20March,2003.

InJune,2005SRSFinancePolicedepartmenthasevokedthecriminalcaseon

group of persons for tax evasion in large amounts, using the falsified documents

of a definite Ltd. Within the investigation of criminal case there was clarified that

organised group of persons, utilising the requisites of fictitious registered enterprises,

have imported inLatviaseveral luxurycars, latersellingthem.Fortheregistration

ofcarsthemissingtradershavebeenusedinordertoevadethepaymentsofvalue

addedtax.Atthesametimegroupofpersonsmentionedbefore,usingtherequisites

of missing traders and bank accounts opened with names of non-residents, had

providedtheservicestootherpersonsattemptingtoevadefromtaxpaymentsand

tocarryoutthemoney“laundering”,includingusingtheaccountsofnaturalpersons.

Carrying out the house-search in clarified addresses, involved into “money laundering”

there have been detained 40 fictitious and 10 offshore companies’ seals, documents,

filled and unfilled sets of strict accounting waybills, as well as i-bank code cards,

Digi-bankpassports,computers,whichhavebeenusedbygroupofpersonsmentioned

beforetocarryoutthecriminaloffences.Inthecourseofthecriminalcaserestrictions

wereappliedandseveralluxuriouscarswereseizedinordertoensurethepossible

confiscation of criminal property and the solution of property issues in several related

criminalprocedures.Carryingouttheinvestigationthecriminalcasewasdividedfrom

basic case on group of persons’ tax evasion in large amounts, using the fictitious

documentsandlegalisationofillegallyobtainedmoneyresourcesinlargeamountson

Section2�8Paragraphtwo,Section275Paragraphtwo,Section�95paragraphtwoof

theCriminalCodeandmaterialsofcriminalcasehavebeensenttoorganisedcrime

and other branch specialised prosecutor’s office to evoke the criminal persecution.

InJuneof2005SRSFinancePolicedepartmentforwardedacriminalcasetothe

prosecutor’s office of investigation of finance and economy crimes to evoke the criminal

persecution on definite Ltd state officials tax evasion and hiding of accountancy data,

whichhavecausedlosestothestateinamountof32,2�thousandLats.Employees

ofSRSFinancePolicedepartmentcarryingoutthepreliminaryinvestigationobtained

sufficient evidence that the Ltd state officials hid the actual calculated and paid salaries

ofemployeesin2002and2003insteadofcomplyingwiththeregulationsconcerning

organisationofaccountancydocumentsdeterminedbylaw.

56

InJuneof2005SRSFinancePolicedepartmentforwardedthecriminalcaseto

the prosecutor’s office of investigation of finance and economy crimes to evoke the

criminal persecution on a definite Joint Stock Company (hereinafter – JSC), which hid

theaccountancydocuments,statistical informationandevaded fromtaxesaswell.

Detectingthe“envelopesalaries”intheJSCstructuralunitsonrequestofSRSFinance

Policedepartmentthetaxauditinghasbeencarriedout,inresultofwhichinaddition

thetaxprincipaldebthasbeenassessedinamountof37,63thousandLats,aswellas

the fine in amount of 37,63 thousand Lats to be paid into the budget of state.

InSeptember of 2005SRS Finance Police department forwarded the criminal

case to the organised crime and other branch specialised prosecutor’s office to evoke

the criminal persecutionon criminal offences–VAT fraudattemptapproximately in

totalamountof8,4millionsofLsandtaxevasionapproximatelyintotalamountof

13,8 millions of Ls, which have been carried out by the definite Ltd in group of persons.

Criminal persecution against four state officials has been requested.

InDecemberof2005SRSFinancePolicedepartmentforwardedthecriminalcase

to the prosecutor’s office of investigation of finance and economy crimes to evoke

the criminal persecution on definite SJC state officials tax evasion in amount of 1,34

millions of Ls. Criminal persecution against two state officials has been requested.


Cash of LVL 99 100 and stamps of different institutions and officials

detectedwithintheframeworkofacriminalprocedure

57

SUPERVISION OF EXCISE GOODS CIRCULATION

Maintasksintheareaofexcisegoodscirculationareissuing,re-registrationor

cancellation of the specific permits (licences) and excise tax guarantee certificates

forbusinessoperationswithexcisegoods,administrationofinlandexcisetaxforoil

products,issuingofexcisestampsandcontrollingoftheircirculation,controlactions

in observation of normative acts regulating excise goods circulation, prevention

of violations of provisions of excise goods circulation and application of sanctions

prescribedbythenormativeacts.Tasksmentionedabovearemainlyperformedbythe

SRSExciseGoodsDepartment.

PrioritiesoftheSRSExciseGoodsDepartmentin2005were:

- supervisionofbusinessoperationswithoilproductsparticularlypayingattention

toexpressmethodsincontroloffuelquality;

- administrationofinlandexcisetaxforoilproducts;

- promotion of the capacity of information subsystems which are related to

excisegoodscirculationandadministrationoftheexcisetaxinordertoimprove

informationexchangewithotherstructuralunitsoftheSRSandtaxadministrations

ofotherEuropeanUnionmemberstates.

Inordertoimprovesupervisionofexcisegoodsandadministrationofexcisetax,

RegulationsoftheCabinetofMinistersNo.662fromAugust30,2005“Procedureof

excisegoodsmovement”andRegulationsof theCabinetofMinistersNo.638from

August 30, 2005 “Regulations on excise duty guaranties on alcoholic beverages,

tobaccoproductsandoilproducts”wereadopted.

Licensing

In2005theSRSExciseGoodsDepartmenthasissuedandre-registered50�3

licences for operations with excise goods. There were approximately 9 946 valid

licencesintheareaofexcisegoodscirculationasonJanuary�,2006,whichis302

licencesmorethaninthepreviousyear.Increaseinthenumberofvalidlicencescan

be explained by changes in normative acts that have positively influenced the business

environment. 35 licences for commercial activities have been cancelled in 2005

becauseoftheestablishedviolationsofthenormativeactsintheareaofexcisegoods

circulation,whichissixlicenceslessthanin2004.Thisindicatesthatentrepreneurs

58

asaresultofsurveillanceactivitiestrytoobserveregulationsestablishedbythelaw

inamoredisciplinedmanner.

In accordancewith changes in normative acts regulating circulation of excise

goods, entrepreneurs who until September �, 2005 had received special permits

(licences) for operation of excise goods warehouse and planned to send alcoholic

beverages, tobacco products, oil, coffee or non-alcoholic beverages applying tax

suspension arrangements, to label alcoholic beverages and tobacco products with

excise tax stamps or apply marking of the fuel as a specific kind of fuel mixing, had

tore-registertheirlicencesincompliancewithrequirementsofnormativeactsuntil

November�,2005.

In 2005 theSRSExciseGoodsDepartment has issued and re-registered 269

generalexcisetaxguarantiesforoperationswithexcisegoodsandapplicationoftax

suspensionarrangements.


Validlicencesintheareaofexcisegoodscirculation

96449946

8000

8500

9000

9500

�0000

0�.0�.2005. 0�.0�.2006.

59


Review of the licensing operations in 2005

Nu

mb

er

of

issu

ed

lice

nce

s

Nu

mb

er

of

rere

gis

-

tere

d l

icen

ces

Number of

cancelled licences

Nu

mb

er

of

susp

en

d-

ed

lic

en

ces

Nu

mb

er

of

re-e

stab

-

lish

ed

lic

en

ces

Nu

mb

er

of

vali

d

lice

nce

s as

on

01

.01

.20

06

.

beca

use

of

vio

lati

on

s o

f

reg

ula

tio

ns

base

d u

po

n t

he

ap

pli

cati

on

of

the t

rad

er

MT Licences for retail

saleofalcoholicbev-

erages

647 �206 �3 250 �0 4 4774

AM Licences for retail

saleofbeer

53 39 0 24 0 0 3�3

VT Licences for whole-

saleofalcoholicbev-

erages

37 47 3 23 � � �66

TM Licences for retail

saleoftobaccoprod-

ucts

�632 867 7 �72 6 3 4�55

TV Licences for whole-

saleoftobaccoprod-

ucts

�� 7 � 8 0 0 45

BM Licences for retail

saleofoilproducts

37 88 2 20 � � 2�6

BV Licences for whole-

saleofoilproducts

4 �7 4 6 � 0 47

Licences for the opera-

tionofexcisegoodsware-

house

42 26� 2 �4 5 4 2�0

Licencesfortheoperation

ofauthorisedtrader

3 5 3 �5 � 0 �9

Licencesfortheoperation

of the representative of

theexcisetaxpayer

0 0 0 0 0 0 �

Total licences 2466 2547 35 532 25 13 9 946

60

Supervision

Inorder toprovidecollectionof theexcise taxonoilproducts, thepriority in

the area of supervision of excise goods circulation and excise tax guaranties was

supervisionofbusinessactivitieswithoilproducts.Therewere�08� fuel samples

takenfromentrepreneursperformingbusinessactivitieswithoilproductsandtheir

qualitytested.Altogether52casesofviolationwerereviewedintheareaofsupervision

of oil product quality and decisions adopted to apply fine in the amount of 8,48 thous.

Lats and to confiscate 100,28 thous. litres of fuel.

In 2005 supervision activities were mainly dedicated to entrepreneurs who

operatewithexcisegoodsandapplytothemtaxsuspensionarrangements,consumers

of denatured alcohol as well as to the supervision of excise goods accompanying

documentsAADandSAAD.

As since March, 2005 Excise goods divisions were established in the SRS

territorial offices, theoretical and methodological training was carried out in the area of

supervision of excise goods circulation. Officials of the SRS Excise Goods Department

and excise goods divisions of the SRS territorial offices carried out joint inspections in

thepremisesofentrepreneursperformingbusinessactivitieswithoilproducts.

In2005altogether3673inspectionswereperformedintheareaofexcisegoods

supervision, 1 298 violations of normative acts established and fines imposed in the

amountof67,82thous.Lats.

Violationsestablishedintheareaofthecirculationofexcisegoodsaremainly

relatedtonon-observanceofaccountingprocedures,usingofimpropercashregisters

for sales of alcoholic beverages and violations of labelling provisions for alcoholic

beverages.


6�


Review of control measures performed by the SRS Excise Goods Department

in the area of supervision of excise goodsOperations Amount

1. Number of inspections 535

Including:

oilproducts 67%

alcoholicbeveragesandtobaccoproducts 3�%

otherexcisegoods 2%

2. Number of established violations 80

Including:

oilproducts 44%

alcoholicbeveragesandtobaccoproducts 56%

3. Reviewed cases and adopted decisions (total)* 244

4. Fines, Ls (total)* 35 605

5. Amount of confiscated goods (total)*

Oilproducts(litres) �00895,4

Tobaccoproducts �39235packages,8cigars

Alcoholicbeverages(litres) 69538,82

Transport(pieces) 4

*includingcasesregardingviolationofexcisegoodsregulationssubmittedbyotherinstitutions(SRSFinan-

cialPoliceDepartment,SRSCustomsCriminalBoard,StatePolice).

Excise tax stamps

In2005theSRStookoverfromtheMinistryofFinancethefunctionofordering,

receivingandcoveringoftheexpensesrelatedtotheprocurementofexcisestamps

providingmoreoperationalservicetocustomersandquickerresponsetochangesin

orderingofexcisetaxstamps.

349552733excisetaxstampswereissuedtoentrepreneurs.

In20052499990�2excisetaxstampsforlabellingoftobaccoproductswere

issued,which is 7,�% less than in the previous year.Decrease can be explained

bythelargereservesofexcisetaxstampsattheendof2004thatwerecreatedby

entrepreneursduetotheincreaseoftheexcisetaxrateasofJanuary�,2005,and

alsoduetothefactthatnormativeactsdidnotprovidere-calculationofdifference

betweenthepreviousandthenewtaxbase.

62

Therewere99558�9�excisetaxstampsissuedforlabellingofalcoholicbeverages,

whichisby20%morethaninthepreviousyear.Increasecanbeexplainedbythe

markettrends,theincreaseintheconsumptionofalcoholicbeveragesaswellasthe

risingofthetaxrateforstrongalcoholicbeveragessinceJanuary�,2006.

Review on the issued excise tax stamps in 2005

Product category Receivers of stamps Amount (pieces)

Alcoholic beverages Holdersofexcisegoodswarehouses 98964235

Importers 589486

Representativesoftaxpayers 0

Total: 9955372�

Tobacco products Holdersofexcisegoodswarehouses 238858378

Importers 458634

Representativesoftaxpayers �0682000

Total: 2499990�2

Grand total: 349 552 733


63

CONTROL OF THE OPERATION OF STATE OFFICIALS

In compliance with the law “On prevention of the conflict of interest in the operation

of state officials” tasks of the SRS in fulfilment of corruption prevention policy are to

controlimplementationofrequirementsforcompletingandtimelysubmissionofthe

declarations, to control implementationof requirements for preparationand timely

submission of lists of state officials, to provide registration and keeping of declarations

of state officials, as well as their publication according to the procedure provided by

the normative acts, to take to administrative accountability state officials and heads

ofstateandmunicipalinstitutionsforviolationoftheprocedureforsubmissionofthe

declaration of the state official or for providing false information in the declaration, and

delayed submission of lists of state officials and their modifications, or the submission

ofincompletelists.

Control of state officials

Number of state officials and submitted declarations

There were 65 046 state officials registered

asonJanuary�,2006,whichis�93�or3,�%

morecomparedtoJanuary�,2005.

78 771 declarations of state officials

weresubmittedwithinayear,whichis7030

declarationsor9,8%morethanin2004.

Numberofstateofficials

63��5

65046

6200062500630006350064000645006500065500

0�.0�.2005. 0�.0�.2006.

Numberofsubmitteddeclarations

7�74�

7877�

68000

70000

72000

74000

76000

78000

80000

2004.g. 2005.g.

64

Established violations and penalties

In 2005 476 state officials were brought to administrative liability for late filing of

income declarations, violation of the procedure for filling and submitting of declarations

and providing of false information, which is almost four times or 375 state officials

morethanin2004.Itcanbeexplainedbytheparticularcontroloverthesubmission

of declarations within fixed deadlines.

Out of 476 state officials brought to administrative liability:

- 395 officials were punished with fine (total 5,9 thous. Lats);

- 70 state officials received verbal reprimand upon closing of the case;

- case has been closed or not initiated against six state officials due to statute of

limitation;

- case has been dismissed against three state officials due to the lack of substance

foradministrativeoffence;

- case has been dismissed against three state officials due to other reasons.

Case materials about 41 state official were sent to the SRS Financial Police

Department for investigation, which is 10 officials or 32,3% more than in 2004. In

2005 criminal cases for non-filing of the declaration has been initiated against five

state officials, cases against two state officials have been dismissed or not initiated

due to the lack of substantial ground, �6 decisionswere adopted not to initiate a

criminalcase,in�6casestheSRShasmadearulingtoapplypenaltybyimposing

fines, issuing verbal reprimands or dismissing charges due to fading out of the due

term.Investigationintwocaseswillbecontinuedin2006.


Numberofstateofficialsbroughttoadministrativeliability

�0�

476

0

�00

200

300

400

500

2004.g. 2005.g.

65


Accordingtoitscompetencyintheadministrationofthelaw“Onpreventionof

the conflict of interest in the operation of state officials” the SRS detects potential

cases of the conflict of interest and informs the Corruption Prevention and Combating

Bureau (hereinafter – CPCB). In 2005 materials about potential conflict of interest

were sent to CPCB on 15 state officials out of which:

- onepersonhasbeengivenawarning;

- CPCB has adopted a decision to bring to administrative liability three state officials

for not reporting about being in the situation of the conflict of interest and violation

of restrictions and prohibitions laid down for state officials by imposing a fine;

- aftertheinspectionperformedbyCPCB,SRSinthreecaseshasappliedapenalty

against state officials for violation of restrictions and prohibitions laid down for

state officials by imposing a fine;

- ineightcasesreviewofthecasematerialswillbecontinuedin2006.

Control of state and municipal institutions

Number of state and municipal institutions, which submit lists of state offi-

cials and their modifications

In2005 thenumberof stateandmunicipal institutions,which submitted lists

of state officials and their modifications has increased by 449 institutions or 13,3%

comparing to 2004. On January 1, 2006 lists of state officials and their modifications

weresubmittedby382�stateandmunicipalinstitutions.

Numberofstateandmunicipalinstitutions,whichsubmit

listsofstateofficials

3372

382�

3000

3200

3400

3600

3800

4000

0�.0�.2005. 0�.0�.2006.

66

Inspections and established violations

In 2005 422 inspections were performed

about compliance of submitted lists of state

officials and their modifications to the established

procedure.Comparedtotheyear2004number

ofinspectionshasincreasedby�66inspections

or64,8%.

Asaresultofinspections�50administrative

offenceswereestablished,whichis56offences

or 59,6% more than in 2004. For established

offencesoftheprocedureforsubmissionoflists

of state officials and their modifications, as well

as for submitting of incomplete lists of state

officials:

- fine has been imposed on managers of 30 institutions (total 1,5 thous. Lats);

- cases against managers of 82 institutions have been dismissed with oral

reprimand;

- casesagainstmanagersof30institutionshavebeendismissedorhavenotbeen

initiatedduetotheexpirationofdueterm;

- threecasesagainstleadershipofinstitutionshavebeendismissedduetothelack

ofsubstanceforadministrativeoffence;

- five cases against heads of institutions have been dismissed due to insignificant

violations.


Numberofinspectionsandestablishedviolations

Numberofestablishedviolations

Numberofinspections

256

94

422

�50

0

�00

200

300

400

500

2004.g. 2005.g.

67

TAX ENFORCEMENT AND RESOLUTION OF DISPUTES

Results of tax enforcement

In2005�45,9mill.Latswerepaidintothebudgetasaresultofenforcement

measures of the SRS territorial offices, which is by 27,0 mil. Lats or 22,7 % more than

in2004.Fromtheenforcedtaxliabilities:

- 50,0mil.Latsor34,3%weresocialinsurancepayments;

- 5�,5mil.Latsor35,3%werevalueaddedtax;

- 30,8mil.Latsor2�,2%-personalincometax;

- 9,4mil.Latsor6,4%-corporateincometax;

- �,5mil.Latsor�,�%-excisetax;

- 2,7mil.Latsor�,7%-othertaxes.

In 2005 25,8% of active tax arrearswere enforced on average eachmonth

while in2004 theenforcement ratewas�8,8%.Improvementof indicatorscanbe

explained by improvement of enforcement operations in the SRS territorial offices as

well as seminars organised by officials of the SRS Legal Department on the issues of

enforcementoflatetaxpayments.

Amountofpaymentsasaresultoftaxenforcement(millionLs)

��8.9�45.9

0

50

�00

�50

2004.g. 2005.g.

68

Results of proceedings in cases of additionally assessed tax payments

In2005SRShadtorepresentitsinterestsforadditionaltaxpaymentassessment

in2057courtsittings,whichis�68courtsittingsor9%morethanin2004.From

2057courtsittings��67werepostponed,in82casesapplicationsoftaxpayersabout

the suspending of administrative acts issued by the SRS officials were reviewed, in 25

casesproceedingsweresuspended,in33casesproceedingswereterminated.

DisputesoftaxpayersandtheSRSaboutadditionalpaymentswerereviewedin

substancein639cases,in44�or69%ofthesecasestheresult(courtdecision)was

inthefavouroftheSRS.In2005theproportionofcasesfavourabletotheSRShas

increasedby2�%(in2004556caseswerereviewed insubstance, fromthesethe

favourableresultwasin266courtsittingsor48%).Resultpartlyfavourabletothe

SRSwasadoptedin63courtsittingsor�0%ofallcases(in2004–43courtsittings

or8%ofallcases),unfavourable–in�35courtsittingsor2�%(in2004–247court

sittingsor44%ofallcases).

From44�courtsittingwheretheresultwasfavourabletotheSRStheproceedings

wereterminated(thejudgementcameintolegaleffect)in�73cases(78%)andasa

resulttaxpayershadtopay�0,8�mill.Latsintothebudget.Theindisputableamount

of the payments into the budget has increased four times compared to the 2004.

In2004from266courtsittingswheretheresultwasfavourable,proceedingswere

terminated(thejudgementcameintolegaleffect)in5�caseandtaxpayershadtopay

intobudget2,77mill.Lats.


69


Pre-court review of tax disputes

In 2005 officials of the SRS Pre-court tax dispute resolution division prepared 721

draftdecisions(in2004therewere935draftdecisionsprepared).

Decisions adopted during the review of cases

Decision after the review 2004 2005

Leftunchanged,including: 545 468

the fine reduced 48 53

Cancelled �28 47

Cancelledinpart,including: �25 59

the fine reduced 9 5

Decidedtoadoptanewdecision � 2

Decidedtoreviewtheappeal �3 9

Reduce the fine 75 90

Not to reduce the fine 4� 30

Decisionadoptednottoreviewtheappeal 7 �6

Total 935 721

TheSRSPre-courttaxdisputesresolutiondivisionprepared�06draftrulingsthat

providedpartialorcompletecancellationofthedecisionsadoptedbythedirectorsof

the territorial offices. One of the main reasons for cancelling the decisions has been

erroneousapplicationofthenormsoftheregulatoryacts(4�case),non-compliance

with the norms of the procedure and insufficient proofs for the substantiation of the

relevantconclusions(20cases).

In2005theSRSPre-courttaxdisputesresolutiondivisionreceivedappealsof

taxpayers on decisions adopted by the directors of the territorial offices imposing

additionalpaymentstothebudgetintheamountof28,2mill.Lats, lossesreduced

by 4,� mill. Lats, losses increased by 390,2 thous. Lats, corporate income tax

reducedby4�,9thous.LatsandtheVATreducedby397,5thous.Lats.Taxpayers

appealed against additional payments into the budget in the amount of 26,7mill.

Latsaswellasreductionoflossesintheamountof3,5mil.Lats.Afterreviewingof

casematerialsdraftdecisionswerepreparedcancellingthepaymentsdeterminedby

decisions adopted by the directors of the territorial offices in the amount of 3,8 mil.

70

Lats(�4,34%oftheamountappealedbythetaxpayers).Inaddition�57,4thous.

Latswereassignedforpaymentintothebudget.

The SRS Director General reviewed 23� appeal of taxpayers to reduce the

additionally assessed fine and in compliance with the Article 331 of the law “On taxes

andfees”in�48caseshemadeadecisiontoreducetheadditionallyassessedpayments

intothebudgetby672,7thous.Lats.In83casesappealsoftaxpayerstoreducethe

additionallyassessedpaymentsintothebudgetweredenied.

IncompliancewiththeArticle4�ofthelaw“Ontaxesandfees”theSRSconcluded

36 agreements with taxpayers cancelling additionally assessed fines in the amount of

279,3thous.Lats.


7�

INTERNATIONAL COOPERATION

Active participation in the events organised by the foreign and international

organisations (European Commission programme Fiscalis/Customs 2003/7, TAIEX,

Intra-EuropeanOrganisationofTaxAdministrations(IOTA),OrganisationofEconomic

Co-operationandDevelopment(OECD),WorldCustomsOrganisation(WCO),European

Anti – Fraud Office (OLAF) etc.) as well as in everyday work of European Council

and European Commission committees has taken place thus promoting the unified

application of the EU legislative acts in the field of taxes and customs and mastering

thebestpracticeofothercountriesinoperationoftherevenueadministrations.

Participationinthehighlevelinternationalevents:

- International tax dialogue – value added tax conference organised by OECD,

InternationalMonetaryFundandItalianMinistryofFinanceinRome,Italy;

- IOTA9thGeneralAssemblyinKrakow,Poland;

- AnnualinternationalmeetingoftheDirectorsGeneralofEUtaxadministrations

“Managementoftaxadministration–objectivesandtheirachievement”Rome,

Italy;

- OECD�0thAnnualGlobalForumonInternationalTaxConventions„Onprevention

ofdoubletaxation”inParis,France;

- The9thMeetingoftheDirectorsGeneralofBalticStatesTaxAdministrationsin

Copenhagen,Denmark;

- Video-conference organised by the World Bank between the specialists from

Latvian and Uzbekistan Tax Administrations regarding use of risk analysis in

planningoftaxcontrolevents;

- WCO2ndconferenceoftheEuropeanregionCustomsServicesdirectorsinAstana,

Kazakhstan;

- Meeting of Leading Customs Official organised by Luxembourg presidency in

Luxembourg;

- Meeting of the Directors of North European countries customs directors on

collaborationissuesinLondon,GreatBritain;

- EuropolmanagementcouncilmeetinginLuxembourg;

- MeetingofthechiefsofPolice,BorderguardandCustomsservicesfromFinland,

Estonia,LatviaandLithuaniainTallinn,Estonia;

- Annual WCO Customs Co-operation council session regarding customs

co-operationissuesinBrussels,Belgium;

72

- MeetingoftheHeadofAsianandEuropeancountriesCustomsServicesorganised

bytheEuropeanCouncilinPebble,Scotland;

- EuropeanCommissioncustomsandcross-borderco-operationconferenceinKiev,

theUkraine.

In promotion of closer co-operation with the tax administrations from other

countries,representativesfromLithuaniantaxadministration,Finishtaxadministration,

aswellasrepresentativesfromUgandataxandcustomsadministrationsvisitedLatvia

in2005.Inpromotionofcloserco-operationwiththecustomsadministrationsfrom

other countries representatives from Swedish Riksdag Tax Commission, German

CustomsCriminalBoardandKingdomofSweden customs servicevisited Latvia in

2005.

In collaboration with the European Commission, within the framework of the

program Fiscalis 2003−2007 seminar on „Excise administrative co-operation issues”

was organised in Riga, where 67 representatives from all the European member

countries and the candidate countries, as well as representatives from European

CommissionTaxandCustomsDirectorateGeneral(TAXUD)participatedintheevent.

The implementationofPhare2003nationalprogramproject „SRSTax control

improvement”wassuccessfullycompletedin2005,withintheframeworkofwhich:

- inCo-operationwiththeNetherlandstaxandcustomsadministrationandDanish

customs and tax administration implementation of the Twinning project was

completed;

- five agreements were concluded – On Establishment of Thematic Checks Support

IT system, On Establishment of Information Exchange system, On Supply of

Fraudulent Transaction Chain Visualisation program, On supply of lap-top

computersandOnsupplyoflicenceforinternationaldatabaseAmadeus.

Documentation regarding Phare national program Twinning Light project

„Provision of exchange of information in accordance with requirements of the EU

directives77/799/EECand79/�070/EECandOECDConventiononMutualAssistance

inTaxMatters”inordertoprovideorganisationofqualitativeexchangeofinformation

inelectronicformwasapprovedinSeptember2005.

SRS Financial Police Department has entered into closer co-operation with

EuropolandtheEuropolNationalUnitoperatingunderthesupervisionofLatvianState

Police.Withintheco-operationframeworkwithEuropol,FinancePoliceDepartment


73


was involved in the member states’ competent authorities expert working group,

establishedwithin the frameworkof theprogram „Hague”, developedbyEuropean

Commission and Europol, prescribing strategy for prevention of organised crime,

strengthening the prevention instruments in connection with organised crime financial

aspects. One of the prevention instruments prescribes development of unified minimal

training standard for all the member states in combating of crimes in financial area for

theperiodbetween2005and2007.

Active participation in program Customs 2007 subprogram Exchanges was

initiatedin2005,byestablishingcontactswiththeprogramExchangeco-ordinators

fromthecustomsservicesofothercountries.Withintheframeworkoftheprogram

exchangeofexperiencehastakenplaceintheareaofdoghandling,areaofphysical

control, on work with scanners, on protection of intellectual property rights and

On implementationandutilisationof security electronic control system.Within the

frameworkof subprogramExchangeof theprogramCustoms2007exchange trips

for 23 officials from the SRS were organised to Lithuania, Finland, Italy and Hungary.

Withinthesamesubprogram�2customsexpertsfromFinland,Lithuania,Italy,Czech

ReplicaandSwedenwerereceived.

Activeparticipation inEuropeanCustomssportsassociation,memberofwhich

Latviaissince2004,wascommencedin2005.EuropeanCustomsSportsassociationis

aninternationalorganisation,establishedin�992consistingasoftodayof�7member

states(Belgium,CzechRepublic,Cyprus,Denmark,Finland,France,Hungary,Ireland,

Italy,Latvia,Lithuania,Luxembourg,theNetherlands,Poland,Slovakia,Swedenand

GreatBritain).Themain ideaoftheorganisation istostrengthenthetiesbetween

theEuropeancustomsadministrations,thuspromotingandorganisingmutualsports

activities.Until now representatives fromLatvian customswith good successhave

participatedincompetitionsfordoghandlers.In2005representativesfromLatvian

customs for the first time participated in shoot competition in Czech Republic. Latvian

and Finish customs friendly hockey match was organised for the first time parallel to

activeparticipationinactivitiesofEuropeanCustomssportsassociation.

74

STATE BUDGET FINANCING AND THE EXPENDITURES

Underthelaw“OnStatebudgetforyear2005”SRShasusedthestatebudget

grants and foreign financial assistance funds according to approved cost estimates and

financing plans. A system of internal control of financial funds, economic transactions

and projects realised by SRS, is established and it ensures efficient and cost effective

useofavailableresources.

Total state financing allocated and the expenditures

No.

Financial resourcesActual perfor-

mance in 2004

Year 2005 (Ls)

Under the lawActual

performance

1. Financial resources to

stand the costs (in total)

71 504 660 70 463 296 68 722 532

�.�. Grants 6�4529�8 640�45�3 640�45�3

�.2. Paidservicesandotherown

revenues

34�696� 4��8320 3454464

�.3. Foreign financial assistance 663478� 2330463 �253555

2. Expenditures (in total) 70 944 777 70 534 614 68 007 151

2.�. Maintenanceexpenditures

(Itotal)

55809925 64498473 62757768

2.�.�. Donationsandgrants,

includingcontributionsto

internationalorganisations

8930439 ��5�65�7 ��468273

2.�.2. Othermaintenance

expenditures

46879486 5298�956 5�289495

2.2. Expendituresforcapital

investments

�5�34852 6036�4� 5249383

BUDGET INFORMATION

75

BUDGET INFORMATION

STATE INVESTMENT PROGRAMS

The breakdown of the financing used during the year 2005 within the frame-

work of State investment program project OP 03 „Customs points on the

borders”

ObjectAllocated

resources (Ls)

Spent

allocations (Ls)

Construction, construction and author’s supervision of

Šķirotava railway customs control post

�435670 �2487�5

Design,construction,constructionandauthor’ssupervision

of railway weighs for Šķirotava railway customs control post

347847 62204

Renovation of SRS building in Rēzekne, Maskavas street 30 �23773 77440

Design,construction,constructionandauthor’ssupervision

of the oil products inspection ramp at Rēzekne commodity

stationCCP

�09760 2362�

Constructionofradiationmeasurementequipmentforthe

CPPRigafreeport;projectdevelopmentforconnectionof

diesel generator to the office building of the SRS Customs

board

998 2080

Investments in total in 2005 2 018 048 1 414 060

Intheyear2005withintheframeworkoftheStateinvestmentprogrammeproject

OP 03 “Customs points on the borders” construction of customs control post “Šķirotava”

wasstarted,termforcompletionofwhichisMay3�,2006.Contractonconstructionand

installation of automatic railway weighs at the customs control post “Šķirotava” was

concluded.Finaldateforcompletionofweighs’constructionisJune22,2006.Realisation

ofthebothabove-mentionedactivitiesisforeseenwithintheframeworkofPhareproject

LE0�04.0�“Inspectioninfrastructureatseaportsandrailroadbordercrossings”.

Intheyear2005withintheframeworkofthesameStateinvestmentprogramme

project OP 03 “Customs points on the borders” renovation of the SRS building in Rēzekne,

Maskavasstreet30hasbeencommencedandtakesplaceinordertoestablishcustoms

clearancecentre.DateforterminationoftherenovationworksisMarch�,2006.

In the year 2005 construction of oil products inspection ramp at Rēzekne

commoditystationofcustomscontrolpostwascommenced.Dateforterminationof

theconstructionworksisMarch22,2006.

76

OTHER PROGRAMMS

Information on expenditure of funds of the projects implemented within the

framework of Phare program (Ls)

Phare project title

Foreign financial

assistance fundsNational co-financing Spent in-

totalallocated spent Allocated spent

2003/004-979-08-02“Staterevenue

servicetaxcontrolimprovement”

�43284 738 233�4 �3065 �3803

2002/000-590-02-0�“Marketsurveil-

lancesysteminnon-foodarea”

605��

2002/000-590-�2-02“Provisionof

exchangeofinformationinaccor-

dancewithrequirementsoftheEU

directives77/799/EECand79/�070/

EECandOECDConventiononMutual

AssistanceinTaxMatters”

90803 67243 �0089 9397 76640

2002/000-590-��-0�“Strengthening

oftheadministrativecapacityof

customsbyimplementingthe

CustomsBusinessStrategyandthe

EUcompatiblecustomsdatabases”

�424287 698�45 98893 98893 797038

2003/004-979-08-0�“Integrated

tariffmanagementsystemandrisks

assessment”

24900� 246655 �9290 �526� 26�9�6

2003/004-979-02-04“Protectionof

IntellectualandIndustrialProperty

Rights”

89�86 72945 9790 9782 82727

2003/004-979-03-0�“MarketAd-

ministrationSystemforAgricultural

Products”

84336 5��6 44�2 44�2

LE0�.04.0�“Developmentofcus-

tomsinfrastructureatseaportsand

railroadbordercrossings”

20�8048

(investment)

�4�4060

(investment)

�4�4060

BUDGET INFORMATION

77

BUDGET INFORMATION

LV/2003/IB/FI/02-TL“Post-clear-

anceAuditReinforcementproject”

93473 72249 9�37 9002 8�25�

LV/2003/IB/FI-08TL“Improvementof

theCustomsAnalyticalWork”

95582 9558� ��948 7303 �02884

In total 2 330 463 1 253 556 2 205 625 1 581 175 2 834 731

78

Quantitative composition of the personnel

Inyearalltogether5349,5staffunitswereplannedintheStateRevenueService

in 2005, including 4 435 officials and 914,5 employees. At the end of 2005 there were

actually 5 019 officials and employees, respectively 4 136 officials and 883 employees

employedinSRS,andofthem3487or69,5%ofallthepersonsemployedbySRSand

�532or30,5%ofallthepersonsemployedbySRSaremen.

Breakdown of personnel per age groups has not significantly changed in 2005 as

comparedwiththeyear2004.Attheendof2005outof50�9personsemployedby

theSRS�383wereattheageupto30years,�387–aged3�to40,�238–aged

4�to50,557–aged5�to55and454–56yearsandabove.

PERSONNEL

Comparisonbetweenthenumbersoftheplannedstaffunitsandactuallyemployedemployeesandofficials

Planned

Actual

5�484963

5350

50�9

4600

4800

5000

5200

5400

2004.g. 2005.g.

Breakdownofpersonnelperagegroups

upto30years

3�to40years

5�to55years

55yearsandabove

4�to50years

25%28%

27%9%

��%

79

PERSONNEL

Education level of Staff

In2005 theproportionof theemployeeswithhighereducationhas increased

from75%in2004to82%in2005.Accordinglytheproportionoftheemployeeswith

secondaryorsecondaryspecialisededucationhasreduced.Attheendof20054�26

employees and officials at the SRS had higher education (three persons acquired

doctor’sdegree,435–master’sdegree),400–havesecondaryeducationand493

secondary specialised education. ��09persons are continuing their education at a

higher education level, out of which five continued their studies for doctor’s degree,

and243–toacquiremaster’sdegree.

3626 employees and officials in 2005 attended different qualification courses

intheareasofcustomsissuesandtaxadministration,coursesforITadministrators

andusers,aswellasothertypesofcoursesorganisedbytheStateAdministration

School.

Length of service at SRS

1 118 employees and officials (as of January 2, 2006) have worked at SRS for

more than five years and 1 873 more than 10 years. Compared to the indices at the

beginningoftheyear2005,numberofemployeeswhohaveworkedatSRSmorethan

five years is decreasing (from 1 552 to 1 118 persons), and the number of employees

whohaveworkedmorethan�0yearsisincreasing(from�376to�873).

EducationlevelofSRSpersonnel

HighereducationSecondaryeducationSecondaryspecialeducation

82%

8%�0%

80

Personnel turnover

In 2005 708 employees and officials were taken on at the State Revenue Service.

65�employeeterminatedtheiremploymentwithSRS.Comparedtotheindicesofthe

previous year number of employees and officials terminated their employment with

SRS upon employee’s initiative has significantly increased. Number of the employees

terminatingtheiremploymentwithSRSupontheemployer’sinitiativeisdecreasing.

In2005527employmentswereterminatedupontheemployees’initiative(in2004

– 366 employees and officials), and the number of employments terminated upon the

employer’s initiative is 112 employees (in 2004 – 496 employees and officials). In

2005sixemploymentswereterminatedduetotheemployee’sdeath.

Personnelturnoverindicatorin2005intotalis�2.6%,thoughinsometerritorial

offices the indicator exceeds even 20 %.

Disciplinary punishments

AlotofattentionatSRSisfocusedonthequalityofworkandthecompliancetothe

rulesofworkprocedure.On-jobinspectionsarecarriedoutatSRSandunfortunately

in the result violations are discovered. However recently a positive tendency can

be observed, where amount of disciplinary punishments applied to the employees

remarkablyreduces.

Disciplinarypunishmentswereappliedforviolationsinrelationto89employees,

which is84cases, lessthan in2004,whenthenumberreached�73cases.Outof

thesethedisciplinarypenaltiesin200566wereappliedinrelationtoemployeesand

officials of SRS territorial offices (19 employees from SRS Latgale regional office, 14

– Riga regional office, 13 – Riga Customs regional office, 4 - Vidzeme regional office

and 3 – Kurzeme regional office) and 23 in relation to employees and officials of the

centraladministration(9–Financepolicedepartment,6–CustomsBoard,3–Excise

goodsdepartment,3–Legaldepartmentand2–CustomsCriminalBoard).

PERSONNEL

8�

PERSONNEL

Typesofapplieddisciplinarypunishment

8�

56

22

59

28

4�

�0

0

�0

0

20

40

60

80

�00

2004.g. 2005.g.

Warning

Reprimand

Wagereduction

Positionreduction

Dismissalfromtheposition

82

Consultation, Information and Education of Taxpayers

Topromotevoluntarycomplianceandhelptaxpayerstopaytaxesinaccordance

withtherequirementsdeterminedbylegalprovisions,agreatnumberofmeasureswere

carriedoutin2005intheareaoftaxpayers’consultation,informationandeducation,

utilisingalltheavailablecommunicationaidsandtechniquesforcommunicationwith

taxpayers.

Asmanyas43�3�2consultationswereprovidedtothetaxpayersinthesphere

of theapplicationof tax legalprovisions in2005,which isby��,4%more than in

2004.Mostofall fromall thegivenconsultations–47%-havebeengivenorally.

Thenumberoftheconsultationsgivenelectronicallyhasincreasedveryrapidly–by

59%morethanin2004,meaningthatitisthemostconvenientwayfortaxpayersto

receivetheanswerstotheirquestions.

Taxpayershavemade34636callsin2005viacentralisedcallcentreintheissues

of tax administration (phone number 72��0��). The most essential questions of

taxpayerswererelatedto:

- personalincometax(8�52or23,5%);

- valueaddedtax(6904or�9,9%);

- tax administration and rights and responsibilities of taxpayers (5 79� or

�6,7%);

- mandatorypaymentsofstatesocialassurance(2200or6,4%);

- way-bills-accounts(�055or3%).

TheSRShasorganised�435seminarsabouttheapplicationoftaxlegalprovisions

in 2005 for taxpayers, professional organisations and other state and municipal

institutions.Intotal,theyhavebeenattendedby38456participants.4923students

ofdifferenteducationinstitutionshavebeentrainedin�82seminars.

In2005asmanyas60942consultations(�799electronically,234�6byphone,

35977orally)wereprovidedontheissuesatthecompetenceoftheSRSrelatedtothe

implementation of the law „On Prevention of Conflict of Interest in Activities of Public

Officials” to state officials, directors of institutions and other interested persons; it is

for22906consultationsor60%morethanin2004.298�informative,reminderor

warninglettersweresentout,�05consultationsorseminarshavebeenorganisedon

thespotininstitutions.

SRS AND SOCIETY

83

SRS AND SOCIETY

The SRS has provided �0 9�7 consultations on customs issues in 2005. The

divisionoftheconsultationsbytypes:

- traderegimesandoriginofgoods–�562;

- TARIC/QUOTA–�923;

- customsproceduresandregimes–�968;

- customspayments–2575;

- declaring(processingofsingleadministrativedocument)–�4�9;

- customsdebtandguarantees–265;

- otherissuesinthesphereofcustoms(organisationofcustomswork)–829.

Since June, 2005 the new Latvian language version of the SRS web site

www.vid.gov.lvisavailablefortaxpayersthat,incomparisontotheprevious,ismore

userfriendlyandcanbeusedmoreeasily.InformationintheSRSwebsiteisbeing

regularly updated and supplemented, the opportunity has been created to send a

question for theSRSexperts, participate in discussions, apply for news and other

up-to-dateopportunities.

Thefollowinginformativematerialshavebeenissuedin2005:

- booklet„WhatHasToBeKnowntoReceivetheRepaymentofPersonalIncome

Tax for Justified Expenses”;

- booklet „Who Has Obligatory Submit the Annual Income Tax Return by April

�?”;

- booklet„CargoControlbyMeansofIonisingRadiationFacilitiesontheBorderof

theRepublicofLatvia”;

- booklet„InformationonExciseTaxRatesintheRepublicofLatvia”;

- booklet„RegistrationofTaxpayers”;

- booklet „TheAccountingof IncomeandExpenditureof thePayersofPersonal

IncomeTax”;

- leaflet „Application of Value Added Tax to Transactions in the EU territory”;

- leaflet „Natural Resources Tax” ;

- leaflet „The European Union Customs Tariff Reliefs – Tariff Quotas”;

- leaflet “What Has To Be Known About Customs Audit”;

- leaflet “Latvian Customs”.

84

Advisory Council of Customs and Businessmen

Theco-operationwithtraders,thatbegunalreadyin2004,continuedactivelyin

2005.TheSRSorganisesregularthemeetingsofCustomsandBusinessmenAdvisory

Council where the representatives from different professional businessmen unions

andassociationsoftrade,industry,transport,logisticsandotherspheres,aswellas

responsible officials from Ministry of Finance and the SRS are invited to participate.

Theissuesrelatedtocustomsworkandacuteforbusinessmenarebeingdiscussedin

meetings.Thebusinessmenareinvitedtosendbeforethemeetingstheirquestionsto

receivecompetentanswersinpresenceduringthemeetinganddiscusscurrentevents

withcustomsexperts.

To ensure the availability of information about the work of Customs and

BusinessmenAdvisoryCouncil,sincethemiddleof2005theinformationregularlyis

beingpublishedinseparatechapterintheSRSwebsiteaboutforthcomingmeetings,

agendaofmeetings,protocolsofmeetings,presentationsgivenwithintheframework

ofmeetingsandotherinformativematerials.

To inform businessmen about the changes in legal provisions in the sphere

of customs affairs, the SRS regularly – once in a month – send electronically to

businessmenabulletinwheretherehasbeensummarisedtheinformationaboutthe

acuteissuesandchangesofpreviousmonthcarriedoutinnationallegalprovisions

regulatedbycustomsaffairs.

Researches carried out

The SRS purposefully strengthens the position – to develop as the service

institution,theorganisationdirectedtowardstheclientthatisavailable,encouraging,

convenientandreliabletotaxpayers.TheSRSworksalottoaccomplishstepbystep

and persistently one of the prior objectives – to ensure qualitative service. To find out

theopinionoftaxpayers,theSRSconstantlycarriesoutthesurveysofpublicopinion.

In 2005 the SRS organised one survey of public opinion to find out the point of

viewofthesocietyabouttheimageoftheSRS.FromNovember��-2�,2005,�0��

inhabitantsatage from�8 to74yearshavebeenpolled indirect interviews inall

regionsofLatviaintheirlivinglocations.

SRS AND SOCIETY

85

SRS AND SOCIETY

Theresultsofthesurveywitnessthattheinhabitants,whohadcontactwiththe

SRS,evaluatemorepositivelytheserviceoftheSRSthantheinhabitantswhodidnot

havedirectcontactwiththeSRS.

The great majority of the participants of the survey confessed that the SRS

functionsandtasksarecomprehensible.ThesocietybasicallyassociatestheSRSwith

theworkoftaxadministrationandcustoms.Bygrowingpossessionofinformation

abouttheSRS,thecommonattitudebecomesmorepositive.Itshouldbenotedthat

theinformationabouttheSRSinsocietymostofcases–70%ofinquiredrespondents

–comesfrommassmedia.

ThereisstillnotanimpeccableimageabouttheSRSinthepublicopinion,though,

thereisagreatnumberofthingsthatarebeingevaluatedpositively–taxcontrol,

workofcustoms,competenceofexpertsandknowledgearebeinghighlyevaluated.

Alongwith positive things, there appear problems that are being indicated by the

inquired respondents – bureaucracy, queues and deficiency of different explanations.

Analysingtheresultsofthesurvey,itshouldbeconcludedthattheprogression

oftheSRStotheserviceinstitution,theorganisationdirectedtowardstheclient,has

beennoticed.Itiswitnessedbythefactthatmajorpartoftheinquiredrespondents

would not be worried by the invitation to come to tax office.

86

Priorities

Priorities in the sphere of tax administration:

- continue to develop the work of consultation, information and education of

taxpayersinissuesoftheapplicationoflegalprovisions;

- encourage taxpayers to theopportunity to submit tax returnsasprovided for

by legal provisions, to file reports or tax assessments in electronic format with

electronicsignature,usingtheElectronicdeclarationsystem;

- introduce Audit support information system in work of the SRS tax control,

developthematicchecksupportinformationsystem;

- pay special attention to measures for the restriction of non-registered

entrepreneurship;

- selectingtaxpayersfortaxcontrolmeasures,prioritywillbegiven:

• tothecontrolofVAT,focusingontaxpayerswhohavedevelopednegative

differencesofdeclaredtotalbusinessvalueagainsttheinformationdeclared

intaxreturnsbybusinesspartners,andtaxpayerswhocarryouttransactions

intheEUmemberstates;

• tophysicalpersonswhoseexpensesexceedthedeclaredincome;

• totaxpayersthathaveariskthatonlyapartfromtheworksalarypaidto

employersistaxedorisnottaxedatall.

Priorities in the sphere of customs affairs:

- strengthen the customs administrative capacity, developing and gradually

introducing the following customs information systems – „Integrated Tariff

Management System”, „The System of Administration of Agricultural Goods’

Market”, „Automatic Identification System of Vehicles and Containers”;

- implementing theEUE-Customs initiative, tocontinueworkonExportcontrol

system and introduction of Import control system, thus, ensuring in future

electroniccustomsdataexchangebetweenmemberstatesinco-operationwith

othercustomsservicesoftheEU;

- develop the analytical work of customs and ensure efficient risk management to

promotethedetection,combatingandpreventionofcustomsoffencesoninternal

andexternalbordersoftheEU;

PLANS FOR 2006

87

PLANS FOR 2006

- implementingthemoneyresourcesallocatedwithintheframeworkoftheproject

of Schengen Facility finance program, equip Customs Control posts of the Republic

ofLatviawithtechnicalfacilitiesandequipmentnecessaryforqualitativework,

aswell aspurchase20 drug-detectiondogs thatwill be trained in searching

drugs;

- continue active co-operation with the EU institutions and ensure sufficient

participation of Latvian customs representatives in development co-operation

projects and in work of the EU institutions in the sphere of unified EU customs

legislationdevelopment.

Priorities of the SRS Customs Criminal Board:

In2006theSRSCustomsCriminalBoardcarriesoutwork inaccordancewith

„PreventionandCombatingStrategyofSmugglingoftheSRSTerritorialInstitutions

for2005-2009”(hereinafter–strategy).Intheactionplanof2006developedaccording

tothisstrategythefollowingprioritiesofoperationaredetermined:

- combating drug trafficking;

- combatingorganisedcrime.

Priorities of the SRS Finance Police Department:

- combatingorganisedcrime;

- combatinglegalisationofillegallyobtainedmoneyresources;

- combatingtaxfraud;

- combatingcriminaloffencesthatarerelatedtothepaymentof„envelopesalaries”.

Priorities of the SRS Excise Goods Department:

- in thesphereof thesupervisionofexcisegoodsmovement–supervisionand

controloftheutilisationofexcisetaxguarantees,aswellasthesupervisionofoil

products(fuel),includingthequalityofbio-fuel;

- monitoringoftheestablishmentofoilproducts’reserves;

- establishment of information analysis systemof excise goods’movement risk

intheSystemofDatastoragetoensuretheoperationof informationanalysis

system movement risk of alcoholic drinks, tobacco products and oil products

(fuel)intheSRSstructuralunits;

88

- new functions – implementation of certification of small constant breweries along

withexistinglicensingprocedures.

Priorities of the SRS Corruption Detection Department:

- improvementofco-operationwiththeSRSstructuralunitsincontrolofincome

legitimacy of state officials;

- promotion of electronic submission of tax returns of state officials and lists of

state officials.

Priorities of the SRS Finance Department operation:

- optimisation of money flow control system to ensure operative management of

financial resources allocated to budget and minimise well-timed non-assimilation

risk of the allocated financing;

- implementationofcontrolmeasuresintheSRSterritorialinstitutionstoanalyse

the co-ordination process management of changes of financing allocated to the

budgets of the SRS territorial institutions that further would ensure the unified

development of co-ordination system of changes of financing allocated to the

SRSbudget;

- improvementofmethodicalmanagementandoptimisationofco-operationwith

the finance employees of the SRS territorial institutions.

PLANS FOR 2006

89

PLANS FOR 2006

Financial commitments

Financing allocated to Phare program, Transition facility assistance program

and Schengen Facility financing program projects for 2006 (Ls)

Title

Financ-

ing plan

of foreign

financial as-

sistance

Co-financing

from state

budget

Plan in total

Projects of Phare program

2003/004-979-08-02 „Improvement of State Revenue

ServiceTaxControl”

686743 2�8�09 904852

2003/004-979-08-0� „Integrated Tariff Management

SystemsandEvaluationofRisks”

�94953� 6427�4 2592245

2002/000-590-��-0� „Strengthening of Customs Ad-

ministrative Capacity, Introducing Customs Strategy

andtheEUMutuallyCompatibleDataBases”

744724 4�476 786200

2003/004-979-03-0�„TheEstablishmentofMarketAd-

ministrationSystemofAgricultureProducts”

�37046 20733 �57779

LV/2003/IB/FI-08TL„ImprovementofCustomsAnalyti-

calWork”

23895 23895

LV/2003/IB/FI/02-TL „Improvement of Post-clearance

controls”

�8063 �8063

2003/004-979-02-04„ProtectionofAuthor’sRightsand

IndustrialPropertyRights“

�7838 �7838

Total 3577840 923032 4500872

Transition Facility assistance program project

TF2004“StrengtheningofFraudCombatingControl” 666785 262269 929054

Financing program of Schengen Facility

FinancingprogramofSchengenFacility 2303�0 2303�0

90

Financing (Ls) allocated to prior activities of the State Revenue

Service in 2006

Title of prior activityFinancing allocat-

ed to prior activity

Additionally allocated

staff units

Introductionofthelawofbio-fuel 2�7367 9

Ensuring controls of personal income tax returnsand

acquisitionoftechnicalequipment

3000000 �03

Increaseofminimummonthlysalaryfrom80Lsto90Ls �906

ImprovementoftheinfrastructureoftheStateRevenue

Serviceinformationsystem

9�8525

IncreaseoftheStateRevenueServicecapacity 3850722 24

Strengtheningofcustomsadministrativecapacity 325000

Refundofexcisetaxondieselfueltofarmers 6655762

International projects

- ItisintendedtocompletetheimplementationofIntegratedtariffmanagement

systemin2006intheEuropeanUnionPhareprojectNo.2002/000-590-��-0�

„StrengtheningofCustomsAdministrativeCapacity,IntroducingCustomsStrate-

giesandMutuallyCompatibleDataBasesoftheEuropeanUnion”;

- RiskinformationmanagementsystemwillbedevelopedtillNovember30,2006

intheEuropeanUnionPhareprojectNo.2003/004-979-08-0�„IntegratedTariff

ManagementSystemandRiskEvaluation”;

- Data exchange system between the SRS and Rural Support Service will be

developed till November 30, 2006 in the European Union Phare project No.

2003/004-979-03-0�„TheEstablishmentofAdministrationSystemofAgricultural

Goods’Market”;

- StateprocurementprocedureandworkonthedevelopmentofAutomaticidentifying

systemofvehiclesandcontainerswillbeorganisedin2006intheEuropeanUnion

Transition Facility 2004 program project No. 2004/0�6-998 „Strengthening of

FraudCombatingControlSystemontheExternalBorderoftheEU”;

- theEUPhareTwinningLightprojectNo.LV/2003/IB/FI-08TL„Improvementof

Customs Analytical Work” will be finished in May of 2006, the objective of which is

PLANS FOR 2006

9�

PLANS FOR 2006

to develop the analytical work of customs and ensure efficient risk management

to promote detection, combating and prevention of customs offences on the

internalandexternalbordersoftheEU;

- Workwill be completed on the construction of CustomsControl Post inMay of

2006 in Šķirotava railway station in Riga, that is provided in the European Union

Phareproject„CustomsControlInfrastructureinPortsandonRailway”andisbeing

co-financed in State Investments’ program OP 03 „Customs Posts on Borders”;

- participationintheeventsoftheEUCustoms2007program,moreactivelyutilising

theopportunitiesofCustoms2007programinthesub-programofExchangeand

inthesub-programofBenchmarking;

- implementing the tender No.� „Purchase of Technical Equipment within the

Framework of Schengen Facility Finance Program” of Schengen convention finance

program project No. VID/1/6 „Increase of the Efficiency of Persons and Their

BelongingsControlonExternalBorder”,in2006therewillbepurchasedradios,

computertechnique,photo,audioandvideotechnique,roentgenfacilities,tests

for identification of drugs, night vision devices, communication facilities and other

technicalequipment;

- implementing finance program project No. VID/2/7 „Purchase of Drug-detection

Dogs”ofSchengenFacility,in2006itisplannedtocarryouttheprocedureof

statepurchaseandsign theagreementon thepurchaseof20drug-detection

dogsthatwillbetrainedonsearchingdrugs;

- implementingtheEuropeanUnionE-Customsinitiative,in2006theworkwillbe

continuedonensuringtheimplementationoftherequirementsoftheRegulation

(EC) No. 648/2005 of European Parliament and Council accepted in April �3,

2005(amendmentsofTheCodeofCommunityCustomsinthesphereofsafety

thatprovidesthesubmissionofthepre-arrivalandpre-exporttaxreturns,the

conception of Acknowledged merchants and the establishment of Community

RiskManagementSystem), according to theEUPhareprojectNo. 2003/004-

979-08-0�„IntegratedTariffManagementSystemandtheEvaluationofRisk”in

2006therewillbecarriedouttheworkontheimplementationofthegovernment

purchaseNo.FMVID2005/628„DevelopmentofExportControlSystemforthe

Requirements of the SRS”, it is planned to start work on the introduction of

ImportControlSysteminLatvianCustomsin2006.

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Planned researches

Itisplannedtocarryoutthefollowingresearchesin2006:

- Survey of target groups about the level of awareness of taxpayers and

understandingaboutElectronicdeclarationsystem;

- Quantitativesociologicsurveyaboutthequalityoftaxpayers’service;

- Quantitativesociologicsurveyaboutthequalityofcustomsclients’service;

- QuantitativesociologicsurveyontheSRSimageinsociety;

- SurveyoftargetgroupsontheSRSimageinsociety.

PLANS FOR 2006

Documents

CONTENTS - Valsts ieņēmumu dienests gada parskats eng.pdf · CONTENTS INTRODUCTION OF THE SRS DIRECTOR GENERAL 2 ... New web site of ... - to form social idea about the necessity