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The Directorate of Tax Investigations in Iceland - Skattrannsóknarstjóri ríkisins

• a short summary in English.

The Tax Authorities in Iceland

The structure of the Icelandic tax authorities is such that three institutions each have their special fields of work. The offices in question are the Internal Revenue Directorate (ríkisskattstjóri), the State Internal Revenue Board (yfirskattanefnd) and the Directorate of Tax Investigations. Additionally, there are nine district tax offices located around the country (skattstjórar).

The Internal Revenue Directorate is in charge of the co-ordination of tax measures between the districts and is the head of tax control in the country. It implements advisory services for the public on tax related matters and manages the operation of computer systems that links the tax authorities.

The State Internal Revenue Board decides in cases of disagreement between the taxpayers on one hand and the relevant district tax office or the Internal Revenue Directorate on the other hand. The State Internal Revenue Board also decides tax fines through closed administrative procedures in those cases where the claim of fines is implemented by the Directorate of Tax Investigations.

The nine district tax offices are in charge of tax decisions and provide services to the public in the district. The district tax offices are located in Reykjavík, Akranes, Ísafjörður, Siglufjörður, Akureyri, Egilsstaðir, Hella, Vestmannaeyjar and Hafnarfjörður.

The Directorate of Tax Investigations is in charge of the investigation of alleged violations of the tax law, particularly of the more serious nature and decides upon penalty procedures for such violations.

The Directorate of Tax Investigations

The Directorate of Tax Investigations was established in 1993 and is a specialised, independent organisation within the tax system. The head of the Directorate is appointed by the Minister of Finance and is only responsible to him. The office of the Directorate of Tax Investigations is located in Reykjavík, but investigates alleged tax crimes in all the nine tax districts.

The office has 24 employees. Most of them have a university degree in either business, economics or law. The budget for the year 2006 is ISK 155 million, app. US$ 2,2 million.

The main tasks of The Directorate of Tax Investigations are:

• To investigate cases where there is a suspicion of tax fraud.
• To represent the state in cases where the penalty procedure takes place through a closed administrative action by the State Internal Revenue Board.
• To prepare major cases for criminal proceedings, i.e. prepare cases for further investigation by The National Commissioner of the Icelandic Police and for the Directorate of Public Prosecutions.

The Directorate of Tax Investigations investigates the more serious tax fraud cases, e.g. evasions regarding income taxes or value added taxes. The Directorate receives cases from the district tax offices when they, upon conducting their regular tax control, have found taxpayers to be in breach of the tax law, but the district tax offices and the Directorate of Internal Revenue are obligated by law to report to the Directorate of Tax Investigations all cases where there is suspicion of tax fraud. The Directorate also receives cases from other parties, including the state’s tax collectors and the police, in instances where specialist skills are required in terms of e.g. accounting-fraud cases.

Every year the Directorate of Tax Investigations investigates approximately 100 cases concerning all kinds of suspected tax frauds. Tax fraud has turned out to be more extensive in some industries than others, such as the restaurant and food industries.

The Fight Against Tax Crimes

Since the Directorate of Tax Investigations was established in 1993, major steps have been taken in the fight against tax crimes. The increased amount collected by the state’s tax collectors, over the last few years, due to the efforts of this office, have amounted to more than ISK 4,000 million, app. US$ 58 million, and a large number of rulings and administrative decisions have been made on tax fines.

The Directorate of Tax Investigations has a close co-operation with the Economic Crime Division of the National Commissioner of the Icelandic Police, which is a specialised body for serious economic crimes and tax frauds.

Additionally, general tax control under supervision of The Directorate of Internal Revenue has been increased and more stringent control is exercised of, e.g. deductible corporate expenses and value added taxes. Regular reports are made to the public on cases that are subject to court procedures and of the sentences ruled in such cases.

The Icelandic population is now clearly more aware that much effort is being put into tax control.