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.

There is a major investigatory component to their implementation, which generally requires an exhaustive review of the inspected taxpayer's tax situation. For this reason, the bodies that carry out this process are given the highest powers that regulations grant to the Tax Administration.

These activities are carried out by bodies of Special Delegations and of the Central Office of High-Income Taxpayers, who are responsible for developing the tax and customs inspection.

Beside the inspection activities, this category also includes actions conducted by Customs Surveillance, as part of their fight against smuggling and money laundering, and, in investigation missions, in collaboration with the other Tax Agency bodies with tax control functions, along with actions carried out by the National Office of International Taxation.

Selective control activities normally end in the corresponding administrative settlements, which regularise the taxpayer's tax situation, or in the filing of a report with the Tax Ministry when, over the course of the actions, criminal acts against the Treasury, money laundering or smuggling are detected.

Thus, in 2017, 225 reports of tax crimes were filed with the Tax Ministry, affecting a total of 212 taxpayers (notwithstanding the actions of Customs Surveillance in the sphere of tax fraud crimes). The overall amount of defrauded payments is 327.83 billion euros. These figures are shown in the following table of the Appendix: 

The key figures resulting from selective control actions are shown in the following table of the Appendix:

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 total amount of debt settled in 2017 rose to 5.006 billion euros. This amount includes the debt and settled debt in 2017, as well as debt from previous years settled in 2017, not including debt in the fiscal year contained in records that have not been confirmed at 2017 year end.

By groups of programmes, an increase in activities in Companies and Shareholders took place (2,588 files, with a 5.42% increase against the 2,455 files finalised in 2016) and Tax Benefits (1,079 files with a 6.83% increase against the 1,010 files finalised in 2016), and a decrease of activities in Sectorial Verification (2,644 files with a 9.79% reduction against the 2,931 files finalised in 2016), Professionals (2,721 files with a 4.36% decrease against the 2,845 files finalised in 2016), specific verification and investigation activities (5,253 files with an 8.68% decrease against the 5,752 files finalised in 2016), control of SMEs (4,133 files with a 5.14% decrease against the 4,357 files finalised in 2016) and irregular invoicing and fraudulent schemes (1,307 files with a 1.51% decrease against the 1,327 files finalised in 2016).

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 2017, 2,603 settlements were made, with a settled debt of 372.51 million euros.

Special Taxes:

In 2017, verifications were primarily focused on the following areas:

• Exemptions and cases of not being subject to the Special Tax on Certain Means of Transport, as well as reviewing the gross tax bases declared and the repercussion of fraud regarding this tax on taxes borne from foreign trade, especially in relation to fraud due to the misapplication of exemptions regarding the rental of vehicles and recreational boats.
• Improper use of subsidised diesel, through diversion by the owners of establishments registered in the territorial register of Excise Duties and/or by the end consumers of the subsidies diesel for uses not stipulated in article 54.2 of Act 38/1992, of 28 December, on Excise Duties.
• Control of the application of exemptions and cases of not being subject to the Tax on Electricity.
• Control of the tax return and payment of the Special Carbon Tax, derived from Act 15/2012, of 27 December, on tax measures for energy sustainability.
• Control of the Tax on Alcohol and Alcoholic Beverages, by inspecting taxpayers that own at least one establishment with one of the following issue authorisation notes: B7 (tax warehouses of derived beverages) and/or DB (tax warehouses of alcoholic beverages).
• 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.

Fraud in this area has multiple potential variables. On the one hand, there are situations in which the real price of goods does not correspond with the commercial documentation presented during dispatch at customs, whereby the most affected sectors are textiles, shows, bags and leather products coming from Asia. There are also cases in which, when there are concepts to include in the customs value, under the concept of adjustments to the price paid or payable, the value has not increased. Finally, the risk entailed by the growth of e-commerce must be taken into consideration, in that the simplifications in place for this kind of small-sized dispatch, as a general rule, can facilitate the declaration of values lower than the true values.

With respect to reviewing the origin of goods and the application of antidumping duties, fraud consists in making the connection between the goods and the manufacturer disappear, by filing false or forged certificates of origin and invoices, or making sales - real or fictitious - in the true country of origin with other third countries with preferential treatment or without antidumping duties, or incorrectly applying the additional code approved for certain exporters, which entails the payment of an antidumping duty at a lower amount than the general figure, or for nothing. In the same way, an antidumping right could be circumvented by applying a lesser custom duty to that which is really applicable.

With respect to importing agricultural or fishing products, the tax risks from previous years are generally maintained: undervaluation, incorrect customs classification and false declarations of preferential origin.

This year, verifications of export refunds for agricultural products are not included, as they have practically disappeared, and therefore no specific control of refunds within the 2016/2017 Control Plan for financial operations charged to the FEAGA has been assigned.

As for VAT on imports and the control of applying reduced rates, the aim is to regularise the tax situation of taxpayers who have paid inferior VAT amounts upon import to those actually due, due to the incorrect application of the tax rate.

In terms VAT on imports and the exemption on releases into free circulation, there can be two types of fraud: the release into free circulation in Spain without the goods being sent to another member state, with fraud in the taxable event of VAT on imports, and the release into free circulation in another member state, with the subsequent dispatch of the imported goods to Spain, without a declaration of the taxable event of intra-Community acquisition by the Spanish taxpayer (in this case, Mutual Assistance is required). In both cases, the subsequent deliveries of goods in Spain subject to VAT may not have declared this tax.

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.

As a result of these actions, in 2017, 130,008kg of hashish, 31,667kg of cocaine and 8,378,042 packets of tobacco were intercepted, representing a total of 967 crimes and 7,261 infractions. Furthermore, 87 crimes of falsification and 2,999 infractions were reported, along with 59 money laundering crimes.

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

International taxation

Throughout 2017, the National Office of International Taxation (ONFI) continued to strengthen its position in the fight against fraud and international tax avoidance. During this period, notwithstanding the attendance of officers in working groups in relevant international organisations regarding international taxation, and their participation in tax inspection planning activities, the ONFI focused once again on inspections, finalising more than 200 during this period, a similar amount to previous years.

These activities include the instructions of prior agreements on valuing related transactions (APA), negotiating mutual agreement procedures regarding direct taxation and support and collaboration activities in inspection procedures, among others.

With respect to APAs, the activity of the ONFI continues to reduce litigation and improve the legal security of the taxpayer, through prior agreements regarding transfer prices, guaranteeing tax collection in accordance with legal requirements. In 2017, the ONFI participated in managing 138 files, compared with 129 in 2016. Of this total, 39 were finalised, 25 were admitted, 5 were dismissed and, in 9 cases, the requesters withdrew them. The APAs admitted in 2017 allowed for guaranteed gross tax bases of less than 1,400 million euros. against the 3,300 million euros guaranteed in the APAs admitted in 2016, although in that year there were sporadic actions for amounts of around 1,800 million, which distorts the comparison.

In turn, in 2017, the ONFI participated in 259 mutual agreement procedures regarding direct taxation, a rising number, compared with 237 in 2016 and 125 in 2015. In these procedures, the ONFI continues to adequately defend Spanish tax bases - primarily in situations of double taxation - both in regularisations with a cross-border scope carried out by the Spanish Administration, and in those carried out by administrations in other countries. Of this total number of procedures, 53 were finalised last year, discussing gross tax bases of more than 930 million euros. In 2016, 46 procedures were finalised, with a value of 860 million euros, in terms of the tax bases being defended.

The ONFI also supported and collaborated in inspection procedures, focused on complex issues of international taxation. This activity is particularly relevant in the area of inspections of the Central Office of High-Income Taxpayers. In 2017, the ONFI has participated in 182 inspection activities, 113 of which were finalised, with a total amount of adjustments to gross tax bases of more than 2,200 million euros. In 2016, 93 inspection activities were carried out with the participation of the ONFI, with adjustments to tax bases of more than 3,700 million, although there were sporadic actions in that year for an amount of around 1,700 million euros, which distorts the comparison. Over the last three years, between 2015 and 2017, the participation of the ONFI in inspection actions, whether in person or through documents, allowed for gross tax bases to be increased by an amount of more than 8,600 million euros.