Tax fraud: “Nobody knows in Bercy” how big it is

Last March, the Senate Finance Committee launched an information mission on the fight against fraud and tax evasion to take stock of all the systems put in place in recent years in this area, to detect flaws still exist and make proposals to reduce them. It delivered its conclusions at the end of October. To comment on them, Capital asked the senator (LR) of Meurthe-et-Moselle, Jean-François Husson, rapporteur for the mission.

You investigated for several months the hunt for tax evasion in France. Have you been able to obtain information on the levels of revenue that does not go into the state coffers?

Jean-Francois Husson: Unfortunately no. Nobody knows it at Bercy. We are reduced to haphazard estimates. The evaluation of the extent of tax evasion would however be absolutely essential to properly estimate the effectiveness of the fight. Remember that, last year, the tax audit made it possible to recover 10.7 billion euros as a whole. When he was Minister of Public Accounts in the government of Edouard Philippe, Gérald Darmanin wanted to launch an observatory on the question. But the latter never saw the light of day.


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By definition, fraud is hidden. Measuring it is tricky.

Of course. This is no reason to do nothing. There are methods that make it possible to approach it, either by extrapolation of the results of the tax audit, or by a more global analysis of the macroeconomic data. Even imperfect, they have the merit of existing. I note that some countries have implemented assessments of this kind, such as the United States or the United Kingdom. Even in France, there are attempts.

In 2019, Edouard Philippe had asked the Court of Auditors to work on the amount of fraud in compulsory levies. She indicated that she did not have the time to provide an overall figure. The task was then entrusted to INSEE, which carried out initial work solely on VAT fraud. The amount has been estimated at between 20 and 25 billion euros per year. A figure to be compared with the 904 million collected in 2021. The mission proposes to relaunch this work, with results from the next finance law.


Tax fraud: the consequences of the end of the Bercy lock

Are the means devoted to fraud commensurate with the challenges?

We found that between 2015 and 2020, the staff dedicated to tax audits decreased by around 13% to just under 11,000 people. This is especially true at the local level, where, it must be admitted, especially in the case of individuals, honest errors are more frequent than gross cheats. Conversely, the workforce is fairly stable in the central offices, which focus on files with high financial stakes.

At the same time, there is a welcome rise in artificial intelligence tools, capable of processing an ever-increasing volume of data from various sources. We met the dedicated teams in Bercy. We had more the impression of being in a start-up with young geeks than in the Ministry of Finance with traditional tax inspectors! Last year, 45% of checks were programmed thanks to “data mining” (data mining, editor’s note) and the objective of 50% is announced for 2022. Too bad that we do not yet measure the effectiveness of these new technologies, particularly in the detection of the most sophisticated frauds. Here too, a performance indicator should be created.


Swimming pools, verandas… cheating will quickly become impossible

What about the legal response for the most serious frauds?

Until 2018, Bercy had the monopoly to file a complaint or not in a file of tax evasion, after the opinion – almost always favorable – of the tax offenses commission (CIF). At the time, we worked in the Senate, to blow up what is commonly called the “lock” of Bercy. Created in 1920, it seemed to us from another age, for lack of sufficient transparency with a permanent risk of suspicion. Let us remember the Cahuzac affair in 2013, in which the Budget Minister was accused of having accounts abroad! If he hadn’t left on his own, would he have denounced himself?

The law on fraud passed four years ago has clarified things. From now on, all files exceeding 100,000 euros in tax reminders, plus the increases provided for the most serious offenses, such as repeat offenses, occult activities, or opposition to a tax audit, are automatically sent to the prosecution. For other cases, the tax authorities retain their freedom to transmit what they believe to be criminal sanctions, after consulting the CIF.


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Should we go further in this area?

We asked ourselves the question of whether to lower the criteria for compulsory denunciation, before finally giving it up. First, as we know, justice is overwhelmed. However, the current reform has logically increased the number of files it must process: 1,620 last year, against 932 in 2018. No need to overload it further, at the risk of seeing processing times lengthen and cases the less serious ones should be dismissed, which is already happening.

On the other hand, we are campaigning to make everyone’s work easier. Little is known about it, but the tax authorities make specialized assistants available to the justice system to help them deal with complex cases. Their access to certain confidential documents can sometimes cause problems and waste precious time. Their status should be clarified.

Similarly, anything that can unclog the courts is to be encouraged. For example, negotiated justice procedures to settle the most complex disputes with companies and prevent them from getting bogged down. One in yours is better than two in you, as the saying goes. More than 2 billion euros, for example, have recently been recovered from Google and McDonald’s under these conditions. Or even the plea-guilty procedure.


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In exchange for an acknowledgment of the offence, the accused person is offered a sentence by avoiding a criminal trial. Finally, it must be recognized that we were skeptical about the new tax police created by the 2018 law and made up of fraud experts. We feared that it would come to “bump” with the investigation services that already exist. However, all the magistrates we interviewed voted for it. It should therefore be strengthened.

VAT fraud has increased in recent years. How to deal with it?

There is progress but much remains to be done. Admittedly, it is not simple. This fraud is often the work of crooks experienced in false invoices and ephemeral and fictitious companies. This requires being reactive, because fraudsters quickly disappear into the wild once their packages have been completed. In addition, the increase in online sales is another aggravating factor. Fortunately, the 2018 law has forced the major platforms that host sellers from all over the world to be more rigorous. They now risk having to pay the VAT of a seller who would defraud.


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These sites have started cleaning up, although it’s far from perfect. We could also improve things by further automating exchanges between the tax authorities and customs or by allowing the latter to directly sanction tax evaders spotted among importers. They don’t have the right today. Finally, the law should be amended to facilitate the collection of public information posted on social networks by taxpayers, obviously respecting privacy and data protection.

Panama Papers, Pandora Papers… Many revelations about offshore companies by wealthy individuals or companies have taken place in recent years. Do we know if the tax authorities were able to take advantage of it?

It is a long and tedious job for the administration to find tangible elements allowing it to put together a recovery file. France has notably had to launch requests for international tax assistance and not all the countries concerned are cooperative. In total, we estimate the sums notified at just under 1.5 billion euros and the amounts already collected at around 450 million. It’s a drop in the bucket compared to the revealed breakout.

The bulk of the fight can only be done at a global level by also ensuring that our tax treaties with other countries do not contain loopholes allowing abusive arrangements. And we also need to be more rigorous in France. I take an example on which the Senate was at the forefront: the taxation of dividends paid by French companies to foreign residents. Following revelations by the press (CumEx Files) of operations by banks aimed at preventing their customers from being taxed, we voted for an amendment to the 2019 finance bill to curb the phenomenon. But the National Assembly only partially followed us.

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Tax fraud: “Nobody knows in Bercy” how big it is

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