4.1.1. Selective control and investigation

The selective control and investigation actions have the purpose of detecting and regularising the most complex defaults and pursuing the most sophisticated forms of fraud. Their selective nature makes them fall on taxpayers who present a higher tax risk. They have a large investigation component and entail, in general, a review of the overall tax situation subject to inspection. For this reason, the bodies which carry them out have the most extensive powers that the regulations attribute to the Tax Administration.

The selective control actions are carried out by the Financial and Tax Inspection bodies when they refer to internal taxes, and by the Customs and Excise Duties bodies with regard to taxes on foreign trade and the Special Taxes.

These activities usually terminate with the corresponding administrative settlements which regularise the taxpayer's situation, or with the submission of a report to the Public Prosecutor's Office when the activities reveal indications of offences against the Public Treasury, money laundering or smuggling.

In 2015, 341 offences against the Public Treasury have been reported to the Tax Authorities, for a total amount of 442.66 million euros (irrespective of the Customs Surveillance activities on tax fraud offences). These figures are shown in the following table of the Appendix:

Through 2015, these inspection bodies have continued to bolster their inspection activity, carrying out a total of 107,580 nominal verification and investigation operations (8% more than in the previous year and 46% more than in 2011) and settling 7,129.2 million euros of tax debt. The debt settled by the Central Delegation of Large Taxpayers of 3,142.3 million euros has played a major part in this result, representing 44% of the total amount settled.

The key figures resulting from selective control activities are shown in the following table of the Appendix, where a slight increase in the funds obtained can be seen:

Inspection activities on domestic tax contributions

These activities comprise all of those carried out by the bodies of the Financial and Tax Inspection division of the Special Delegations and of the Central Delegation of Large Taxpayers, in exercising the administrative functions attributed to the tax inspection by article 141 of the General Taxation Act.

The Financial and Tax Inspection bodies have settled 6,738.58 million euros of tax debt in 2015, and the following activities have been carried out, by areas of inspection:

• Professionals, companies and partners:

  The bodies have continued to bolster checks in the professionals, with a 16% increase in inspections, in the companies and partners sector (10%), as well as operations and requests for information, which increased by 16%.

• Inspection of refunds:

  Checks on refund requests carried out by the Tax Inspection division form part of the Tax Agency's general strategy aimed at performing an overall check of these applications. The essential goal of this control is to guarantee that refund applications are reviewed correctly, attending to their differing characteristics and risk levels, to avoid the payment of inadmissible refunds. On this basis, these activities increased by 11% in 2015.

• Black market economy:

  During 2015, the activities aimed at controlling and reducing the black market economy using all available tools have continued to be bolstered, including those derived from the 2012 Anti-fraud Act. Following on from this, activities to verify compliance with the limitation of cash payments have translated into 6,087 proceedings to analyse allegations in relation to the breach of this legal limit, which represents 27.8% more than those initiated in the prior year. In addition, at the close of the year 1,313 sanction proceedings had been initiated, an increase of 36.7%.

  Furthermore, this year the entry and search operations carried out by the Inspection Division, with the support of staff from the IT Audit Units, have played a particularly important role once again. The IT Audit Units took part in 1,630 operations of this type, which is an increase of more than 80% since 2012. These operations have proved highly effective for detecting ‘concealment software’, obtaining evidence in general and reducing the amount of time the inspections take.

  At the same time, in the fourth year of the special plan against the black market economy implemented by the Tax Agency, the number of operations carried out in person (known as 'peinados'), aimed at performing in-situ checks of formal and registry obligations in sectors of fiscal risk, has increased once again.

  Out of the 21,810 formal verification operations carried out in person, of particular note are the 14,449 visits carried out within the framework of the specific programme on the black market economy, with an increase of 28.7% due to the increase of operations and the inclusion of new areas of visits. In addition to the visits of the specific underground economy programme, the 5,469 visits aimed at detecting undeclared rentals are particularly significant.

• International taxation:

  In addition, the Tax Agency continued to inspect the transfer prices in operations conducted by multinationals and large companies with presence in our country, along with actions addressed to the abusive regularisation of the deduction of financial expenses in intragroup operations.

  Similarly, the Prior Assessment Agreements on Linked Operations constitute a basic element for preventing risk situations with regard to transfer prices, increasing the taxpayers' legal security and reducing litigious activity. During this tax year, the inspection bodies have processed a total of 96 applications for Prior Assessment Agreements, involving a total gross tax base of approximately 8,035 million euros, and 16 applications have been fully dealt with.

Inspection activities on tax contributions from taxes on Foreign Trade and on Special Taxes

These inspection operations include those carried out by the bodies of the Customs and Excise Duties Inspection division of the Special Delegations and of the Central Delegation of Large Taxpayers, in order to fight fraud that affects both the financial interests of the European Union (that is, equity and European aids for agricultural product exports) and the domestic tax contributions from taxes on foreign trade operations, as well as Special Taxes.

In the 2015 fiscal year, these inspection bodies have carried out a total of 3,989 nominal verification and investigation operations, settling 390.63 million euros of tax debt.

Special Taxes:

In 2015, the checks focused essentially on the following fields:

• Exemptions and cases of non-subjection to the Special Tax on Certain Means of Transport, along with the review of the gross tax bases declared, particularly in relation to cars and vessels not operating under the Spanish flag, corresponding to people or entities that are resident in Spain or that are owners of establishments located in Spain.

• Improper use of subsidised diesel fuel.

• Checks on the electricity generation by producers in facilities that are not registered in the Territorial Register of Special Taxes in the activities intended for this purpose in the Special Tax regulations, as well as the application of exemptions from the Tax on Electricity.

• Checks on the declaration and income of the Tax on the value of electricity production, of the Tax on Fluorinated Greenhouse Gases and of the Special Tax on Carbon.

• Checks on the exemption corresponding to the use of partially denatured alcohol with general denaturing agents.

• VAT fraud derived from operations with products subject to Special Taxes.

Foreign Trade:

The actions in the field of customs control were addressed to reviewing the elements of taxes levied on foreign trade which cannot be checked at the time of customs clearance.

In particular, value checks are conducted at customs on goods in order to detect fraudulent practices. In this regard, the undervaluation of imported goods is considered to be one of the most significant focal points of fraud at present, with clothing, footwear, handbags and leather goods being the most affected sectors. Other checks are intended to verify whether the true price of the goods corresponds to the commercial documentation presented at the moment of customs clearance and, if applicable, justification is requested to clarify any questions that may arise for the customs authorities over abnormally low declarations of values. Also, checks are performed in cases where the value has not been increased, due to there being items to be included in the customs value such as adjustments to the price paid or payable and, finally, where certain circumstances arise - especially linkage - which prevent the transaction value from being used and require the use of secondary valuation methods.

Similarly, inspections are performed on the origin of goods and on the the application of anti-dumping duties in order to prevent fraud in the form of the presentation of certificates of origin and invoices that are false or have been tampered with, in the execution of sales - either real or fictitious - in the true country of origin with other third-party countries with preferential treatment or without anti-dumping duties, and in the incorrect application of the additional code that arises from the payment of an anti-dumping duty lower than the general rate or for a zero amount. In addition, controls are made on the tariff classification of goods.

Furthermore, the specific problems in the import of agricultural and fishing goods are dealt with. The experience acquired over time has served to create the appropriate risk profiles that have allowed the Agency to monitor importer companies in detail and to tackle cases of fraud that are detected, insofar as possible. These situations are determined by the characteristics of the levy on certain products, with a series of special measures that allow imports to be exempt, but associated with certain strict requirements, the implementation of which implies a very high tax charge. They include the tariff quotas through which exemptions or reductions of the rights applicable to the merchandise are established, but with certain quantitative limits that require checks to be performed to ensure they are not applied higher than they should be; additional rights on certain products of variable amounts, according to the evolution of international prices; and securities declared in customs or the possible exemption of rights if the merchandise is eligible for the end-use regime.

In the last few years, the existence of schemes has come to light that are aimed at bringing the merchandise into the European customs territory through companies whose sole purpose is to go to the import office, hiding the identity of the real recipients of the merchandise. In this way, the import becomes the first phase of a chain of tax violations that affect domestic tax contributions in the subsequent phases.

In relation to import VAT, emphasis must be placed on the control of the application of reduced rates and of the exemption in releases for free circulation. In addition, fraud in VAT deriving from foreign trade operations is controlled .

Repression of smuggling, money laundering and other frauds

With regard to combating smuggling and money laundering, the Customs Surveillance units carry out operations aimed at repressing smuggling and illegal trafficking of narcotics, tobacco, counterfeited products and other items, as well as money laundering related to these criminal activities, in coordination with other State entities, carrying out their surveillance and control activities at sea, in the air and on land.

The Customs Surveillance Units also carry out control and support activities for the other divisions of the Customs and Excise Duties Department, including preventive checks in customs precincts through non-intrusive inspection techniques, currency controls, and checking the security of the international transportation chain.

They also carry out activities to combat tax fraud and the black market economy, collaborating with other Departments of the Tax Agency, either in the criminal sphere or in administrative channels. The growing complexity of fraud, as well as the internationalisation of its structures, requires external coordination and the need to optimise the Tax Agency's resources through cooperation and collaboration between the different functional divisions.

In 2015, as a result of these activities, 167,248 kg of hashish, 12,722 kg of cocaine and 11,384,238 packets of tobacco were seized, representing a total of 1,273 criminal offences and 8,531 smuggling offences. Furthermore, 176 forgery crimes and 2,328 offences have been reported, as well as 105 money laundering offences.

The figures on smuggling and the actions carried out during this tax year are shown in the following tables of the Appendix: