State Revenue Service Act to be amended

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06.09.2019

Proposals for amending the State Revenue Service (SRS) Act were debated by Parliament in their second reading on 8 July 2019. This article explores what we see as key aspects.

The rationale behind the proposals
 
The proposed amendments aim to strengthen the SRS powers to process personal data, perform data profiling, seek and receive free information from central and local government agencies, grant and monitor public-benefit-organisation status, physically inspect goods and take samples for analysis, recruit staff with an impeccable reputation, prescribe the use of appropriate restraints, and mandate the Cabinet of Ministers to issue rules for transporting offenders.
 
Key proposals
 
The SRS has started a campaign to educate the public and raise awareness about the importance of paying your taxes and honouring your tax obligations. To make this campaign a success, there are plans to amend some of the sections of the SRS Act and prescribe that one of the SRS tasks is to educate the public about paying taxes, including organising various informational events and holding educational contests with various prizes. These amendments are mainly targeted at young people – pupils and students.
 
The amendments will authorise SRS officials to physically inspect goods not only during administrative proceedings, i.e. on a tax audit, but also in the course of other tax control measures such as thematic reviews, surveys and observations. The officials will also have the power to take samples for analysis during tax control measures. A taxpayer that refuses to present goods for inspection will risk being held liable by SRS officers for failure to cooperate with them under section 159.9 of the Administrative Offences Code. Also, a taxpayer refusing to show goods to the SRS may be denied the right to deduct input VAT.
 
Section 10(1) of the SRS Act lays down officials’ powers in administering taxes but does not authorise them to take photographs or to make audio and video recordings during tax administration or control measures. SRS officials are to have the power to process personal data without the data subject’s consent by photographing, recording or filming any activities carried out as part of their job.
 
The proposals authorise SRS officials to examine any tasks carried out by associations, foundations and religious organisations for compliance with their articles of association (e.g. to request documents and visit sites owned or used by those persons, etc) because the official powers under the current SRS Act relate more to verifying business activity.
 
The proposals also deal with the impeccable reputation requirement for SRS officials. Although SRS staff are expected to have an impeccable reputation, this is not a statutory requirement. One of the criteria for an impeccable reputation involves evaluating a candidate’s loyalty to the Republic of Latvia and the Constitution.
 
Section 16.1(3) of the SRS Act does not authorise the SRS Tax and Customs Police Department officials to transport female offenders in handcuffs, which poses a potential threat to officers. The SRS Act is to include a mandate for the Cabinet of Ministers to issue rules for transporting and guarding suspected and convicted offenders at the SRS in order to adopt a uniform action model across all law enforcement agencies.
 
The question remains about how far the proposed amendments follow the “First Give Advice!” principle, which government agencies, including the SRS, agreed to adopt in 2017 to show their commitment to changing their approach to cooperating with businesses. It seems that the SRS is not yet ready to act as taxpayers’ advisor and partner in creating a customer-oriented government.
 
 
Contacts
Ilze Palmbaha
ilze.palmbaha@pwc.com
Manager, Tax Reporting and Strategy
Tel: +371 6709 4400
Tatjana Burmeistere
tatjana.burmeistere@pwc.com
Senior Consultant, Tax Reporting and Strategy
Tel: +371 6709 4400
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