Tax-evasion loopholes have put the Independent Authority for Public Revenue (AADE) on alert. It is looking at new procedures for setting up businesses, while also moving ahead with the restructuring of the Regional Services of its General Directorate of Tax Operations (GDTO).
Major tax-evasion cases involving losses of hundreds of millions of euros to state coffers from unpaid taxes and social security contributions have highlighted broader gaps in tax legislation, particularly in the setting up of companies that list as owners people acting on behalf of others (figureheads).
Without placing obstacles in the way of starting a business, and with a view to protecting legitimate businesses, AADE is considering requiring applicants who are clearly acting as fronts to appear in person before the tax authority before the process of setting up a business is completed.
How the scheme works
These are people who appear on paper as shareholders, partners or company managers, but do not have actual control. The businesses are set up in their names, while other people behind them run the operation and collect the profits.
When a company begins to accumulate tax debts and debts to EFKA, its real owners can abandon it and continue the same activity through a new company, with a different tax identification number and another figurehead.
In this way, the business can continue operating from the same premises, under the control of the same people, but with a different corporate identity, leaving unpaid taxes and social security contributions behind.
Checks and controls
Speaking to MEGA, AADE governor Giorgos Pitsilis said some people had exploited the simplified procedures for setting up businesses, while the cases uncovered had given the tax administration specific criteria for identifying suspicious cases.
“Figureheads have a profile. They have certain characteristics,” Giorgos Pitsilis said, adding that the possibility was being considered that, when specific risk indicators are identified, the process should not be completed automatically.
In such cases, applicants would be asked to come to AADE for additional checks. “We are not saying that a company should not be set up, but that we need to see you first,” the AADE governor said.
Cross-checking GEMI records
The measures under consideration include more extensive cross-checks of information on individuals involved in setting up businesses. The combined use of data from the General Commercial Registry (GEMI) and the tax administration’s records is expected to be a key tool.
Analysis of the data could reveal links between businesses, frequent changes in management and the repeated involvement of the same individuals — factors that may point to coordinated circumvention of the rules.
The plan is to carry out targeted checks where there are indications of abusive practices, while avoiding additional barriers for all applicants.
The final measures will balance protecting public revenue with a shift in emphasis towards a substantive assessment of company ownership and the identification of the beneficial owners behind formal entries in the registries.
Management team
As part of its broader reorganisation, AADE is also restructuring the Regional Services of its General Directorate of Tax Operations (GDTO).
Under two particularly urgent decisions by the Authority, a Project Management Team (PMT) is being set up to plan, monitor and coordinate all the actions and measures needed to carry out the restructuring.
The PMT, led by its head and comprising 30 members (mainly senior officials), will make recommendations to the Steering Committee on the actions, procedures, and organisational and technical changes required to carry out the project, and will coordinate the services involved.
It will also ensure the operational readiness of buildings and logistical and technical infrastructure, recommend implementation timetables, submit proposals for the transition to the new organisational structure, and produce progress reports and risk-monitoring reports.
Project oversight
The restructuring of AADE’s Regional Services of the GDTO will be overseen by a 12-member Steering Committee, chaired by the head of AADE’s General Directorate of Tax Operations.
The committee’s members will include the heads of almost all the General Directorates: Taxation; Human Resources and Organisation; Digital Services and Systems; Financial and Technical Services; Strategic Planning; Customer Service; Reform and Project Management; and Legal Support.