Taxation fraud to lead to assets freeze


Taxation fraud to lead to assets freeze

The National Council for Peace and Order (NCPO) recently agreed to draft a bill which would permit the Revenue Department to freeze the assets of people and companies they identified as being engaged in taxation fraud.

The bill is designed to plug a very substantial gap in the legislation covering the taxation system. Currently, tax fraud is not covered by the National Anti-Corruption Commission’s set of offences for which it is able to conduct investigations. This means the authorities tasked with raising tax revenues currently have no legal way to block financial transactions by persons they suspect of engaging in tax fraud. This means the chances of recovering back taxes are almost nil.

The Anti-Money Laundering Act covers 11 predicate offences, but none address the issue of taxation fraud. While the offences cover drug trafficking, sexual, gambling, smuggling, and terrorist activities, among others, tax cheats are not considered.

A recent scam involving a massive 4.3 billion baht of valued-added tax (VAT) that is owing to the central government has left the Revenue Department angry because it has no legal means of tracing the monies and therefore little hope of tracing the tax.

An initial probe by the inspector-general of the Finance Ministry suggested up to 18 officials could have been involved in the VAT refund scam. At least four of these were senior directors. The case involved steel scrap and to date only five non-government officials have faced police charges. No officials have been charged.

Part of the driver for the proposed bill, which would permit the freezing of all assets held by domestic financial institutions and allow the Revenue Department to take over police tasks in launching tax fraud probes, is the fact that this year’s tax revenues are likely to fall well short of the targets set by the Finance Ministry.

The tax collection target for the fiscal year 2014 is 1.89 trillion baht. In the first nine months of the fiscal year it had gathered 1.55 trillion baht, but this was 93.5 billion baht, or 6.6 percent, short of the target.

The Finance Ministry therefore realizes that there is likely to be a shortfall of up to 100 billion baht, which will place greater strains on overall disbursements leading into the important 2015 fiscal year.

Both the Finance Ministry and Revenue Department recognize they need to improve the efficiency of the tax collection system, reduce blatant loopholes, and take measures against tax avoidance and VAT scams. New legislation giving them much-needed powers to act against cases of serious tax fraud could go a long way in rebalancing the income budget.