"In 2014, Lithuania took the initiative to develop a smart tax administration system (i.MAS). The Smart Tax Administration feasibility study2 sets out the following objectives:"
"- reducing the shadow economy and increasing tax revenues;"
"- improving the efficiency of tax administration;"
"- reducing the administrative burden for taxpayers."
"The smart tax administration project is of great importance to Lithuania because it can serve as a tool in the fight against the shadow economy. The shadow economy has a negative impact on the tax revenues of the state and includes illegal activities where tax obligations may be avoided or other illegal tax benefits may be obtained. The size of the shadow economy in Lithuania is high: based on the data of the 2019 survey carried out by the company 'Spinter Surveys', it amounted to 23.9% of GDP in 2018. Tackling the shadow economy is one of the priority areas for the government activity, whereas reduction of the shadow economy is one of the main objectives of this system, therefore the proper implementation of this objective could have a significant economic impact on the state."
Shadow economy to be reduced
"Smart tax administration offers opportunities to improve tax administration, but the potential of data analytics has not yet been fully exploited at national level in order to reduce the shadow economy."
"when planning the project activities, there was no sufficient focus on the strategic preparation of the changes, which led to a lack of data and human resources management in the introduction of analytical models that caused the failure to implement the full scale of the planned work."
"the objectives of the iMAMC does not include reducing the size of the shadow economy at country level, therefore we believe that the potential of data analytics is not fully exploited in the fight against the shadow economy, and the contribution of this tool to the reduction of the shadow economy is limited."
"There is no monitoring system to assess how much i.MAS project and the analytical models developed contribute to reducing the shadow economy and increasing tax revenues."
Impact not yet realised
"due to the weaknesses in the implementation of the i.MAS project, some of the objectives of the i.MAS may not be reached in full after completion of the project."
"The solutions developed in the framework of the smart tax administration system provide preconditions for reduction of the administrative burden on business, however this impact has not been realised yet."
"The introduction of these solutions did not reduce the administrative burden for business."
"A system designed to ensure the safety of taxpayers’ data, but some controls are not effective enough The existing legal regulation in the STI does not explicitly regulate the procedure for the legal entities’ consent to the submission of their data to recipients, the lack of regulation on the anonymisation (pseudonymisation) of data and the removal of those data at the end of the procedure, the model for the data confidentiality classification is not updated."
"informing staff about safety requirements and educational measures should be improved, as people are not resistant to social engineering threats, staff are not attentive to social engineering attacks and are easily exposed to email manipulation."
"The control measures on the legality of data leakage and processing are not sufficiently effective in addressing systemic safety deficiencies."
The main questions of the audit were:
- whether voluntary e-services developed/under development in the framework of the i.MAS create the preconditions for reducing the administrative burden for taxpayers;
- whether the models developed in the framework of the i.MAS project will make it possible to contribute to reducing the shadow economy and increasing tax revenues as well as improving the efficiency of tax administration;
- whether the safety of information on taxpayers and their activities is ensured.