ICT in tax administration: non-competitive procedures and discrimination against tenderers in tenders worth CZK 428 million, and increased dependence on suppliers
Press release to audit No 18/07 – 23 April 2019
The Supreme Audit Office focused on the procurement and use of ICT to support the tax management in the Czech Republic. Auditors examined how the General Financial Directorate (GFD) had spent funds on operation, support, as well as the extension of the Automated Tax Information System (ATIS) in 2011 - 2017. For instance, in 2017, the Czech Republic managed taxes amounting to almost CZK 800 billion. At the Ministry of Finance, auditors dealt with, e.g., the introduction of a receipt lottery. In the context of the operation and expansion of the ATIS, the GFD awarded public procurement procedures without tenders in the form of a negotiated procedure without publication (NPWP), for which, as the Supreme Audit Office indicated, there was no reason or which discriminated against possible tenderers with conditions of an open procurement. In this way, according to the SAO, the GFD violated the budgetary discipline totalling CZK 428 million. At the same time, the GFD deepened dependence on ATIS suppliers and purchased technologies that it did not need.
The formation of a separate information system for registration of sales (in Czech “elektronická evidence tržeb” or “EET”) has been commissioned by the GFD to the supplier of ATIS wrongfully without tenders by means of the NPWP. Thus, legal conditions were not met — the separate registration system could have been delivered by other companies as well, and the GFD had therefore violated budgetary discipline amounting to CZK 61 million. In addition, the dependence on ATIS supplier increased unnecessarily. Moreover, the GFD acted without a positive opinion of the main architect of the eGovernment, which is a precondition for major national ICT projects.
To meet the needs of EET, the GFD decided to purchase hardware and other ICT products. The terms of the GFD procurement had been prepared in a way that the participation of potential candidates was decided by the company supplying ATIS — the GFD conditioned the supply and installation of the hardware by being authorised by the company. However, there was no objective reason for that and it was one of the procedures under which the GFD discriminated against possible bidders in the procurement. In this case, it committed a breach of budgetary discipline of CZK 186 million.
Within this procurement, the GFD acquired information technology worth CZK 70 million of which it did not have any need at all — the necessary performance could have been provided by equipment already purchased. The average utilisation rate of the data processing servers purchased for EET data processing worth CZK 48 million was only 1.4 per cent. If the GFD had been purchasing the performance of these servers at least gradually according to its real needs, substantial funds would have been saved — the SAO calculated that the year-on-year price of the technology purchased fell by almost 12%. The GFD paid CZK 6.6 million for post-warranty support for servers. In most cases, these were just simple operations such as disconnection and reconnection of optical cable, key generations by means of a manual, updates of firmware, etc. One such intervention cost CZK 824,000 on average.
Last but not least, it has emerged that the GFD had concluded some contracts linked to the operation of ATIS on the basis of which it was impossible to impose a sanction on the supplier in case he did not timely ensure its functionality, for instance after a failure. In a number of cases, a delay by the supplier took place.
The award through the NPWP concerned additional contracts as well. This method was chosen by the GFD when purchasing ICT equipment for control reports, by which, according to the SAO, the GFD had committed a breach of budgetary discipline for more than CZK 79 million, as well as in the case of the Mini One Stop Shop application1, where almost CZK 100 million was involved.
ATIS, run by the financial administration since 1993, is one of the most outdated information systems of the state. In contrast to some European countries, the staff is heavily burdened by the routine management of tax accounts in this system, to the detriment of support for tax authorities and tax control. While in Belgium, Austria, or Estonia, the administration of accounts and other tax activities made up between 4 and 10 per cent of the working time of employees, in the Czech Republic it was more than 55 per cent in 2015. An inconvenient and outdated system was also one of the causes of increasing staff fluctuation in the financial administration, which increased from 3.3 per cent in 2013 to 9 per cent in 2017.
The introduction of the receipt lottery has been carried out in accordance with the law. The Ministry of Finance spent CZK 15.5 million on related IT technologies.
Supreme Audit Office
1] Applications that do not need to be registered for VAT by service providers in each individual country of the European Union.
- Audit Conclusion from audit No. 18/07 (docx, 202 kB)