How does the tax authorities detect tax evasion? – Challenges

Presented in March by the Minister Delegate for Public Accounts, Olivier Dussopt, the 2021 results of the fight against tax fraud revealed that 13.4 billion euros in adjustments had been notified to individuals and businesses, and that 10, 7 billion had been collected over the year. Figures on the rise, since the amount of taxes claimed by the tax authorities was 8.7 billion euros and those collected 7.8 billion in 2020, the year during which failures against tax evasion had been revealed by a confidential report.

Galaxie, a new tool for processing tax data

Wishing to continue the intensification of the fight against tax evasion, the Directorate General of Public Finance (DGFiP) has just set up a new tool called Galaxie, authorized since the publication of a decree of 11-3-2022. Having received a favorable opinion from the National Commission for Computing and Liberties (CNIL), Galaxie is an IT tool allowing the automated processing of all taxpayers’ personal data, and making them available to all the different actors involved. to the tax audit.

Intended to be used by the various control, investigation and collection departments of the tax administration, Galaxie is described in the decree authorizing it as “a visualization tool, at national level, of a on the one hand, existing links between professional entities (links of participation), and between professional entities and natural persons (links of director, partner or shareholder), and on the other hand, elements of context on the financial and fiscal situation of these persons”. Concretely, Galaxie must be used to monitor exchanges between natural and legal persons (in particular companies) to detect certain undeclared income, but also to analyze taxpayer data to regularize any errors made in good faith.

Increased tax monitoring on social networks

With 45% of its controls initiated as a result of mass data analysis in 2021, compared to 30% in 2020, the tax administration continues to modernize. Since the finance bill for 2020, financial and customs administrations have been authorized to collect data on social networks in bulk. This network analysis can enable them, for example, to discover that certain taxpayers have a much higher standard of living than that declared, or that their tax domicile abroad cannot be accepted. As early as 2014, the geolocation of Johnny Hallyday’s social networks had led the administration to question his tax residence. Five years later, the Nanterre court had even used it to establish that the now deceased singer was a French tax resident and not Swiss or American. Artificial intelligence is also used by the tax authorities through the use of satellite images, in particular to identify extensions or equipment hidden from the tax authorities, such as swimming pools, garden sheds or even verandas. In effect, these undeclared facilities can sometimes modify the rental value used for the calculation of the property and housing tax, and/or require the payment of a development tax.

Information from paid individuals

Like false tax domiciliations abroad used to avoid paying certain taxes in France, transfers of funds to countries with more attractive taxation are scrutinized. Initially dedicated solely to the fight against money laundering and the financing of terrorism, the French intelligence service Tracfin (Treatment of intelligence and action against clandestine financial circuits), created in 1990, is now also a major player against public finance fraud.

Information is also collected by the tax authorities from individuals. Since 2017, a whistleblowing incentive mechanism has existed in France. The latter compensates information providers who have allowed recoveries of more than 100,000 euros. Over the first three years of this system, the tax authorities collected 110 million euros in recovered rights and penalties, granting at the same time 1.83 million euros to informants who fulfilled the conditions to be paid. Considered a success by the tax administration, the system has just been extended for two additional years by the finance law for 2022; and will therefore be valid until at least 2023.

(By the editorial staff of the hREF agency)

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How does the tax authorities detect tax evasion? – Challenges

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