In a new report released on Tuesday 26 May, the OECD Forum on Tax Administration warned tax administrations about the increased risk of fraud during the Covid-19 pandemic.
Public assistance programmes put in place by governments to help businesses cope with the economic crisis caused by the pandemic may encourage individuals and businesses to commit tax fraud in order to maximise the amount of payments or credits, the report points out. Where the aid is linked to the number of employees, the company may, for example, be tempted to register fictitious staff.
The risk is all the greater because the high volume of applications for public aid, combined with remote working, can weaken controls, notes the OECD. In addition, tax administrations have often introduced facilities to help taxpayers meet their tax obligations more simply, for example by allowing the submission of scanned copies rather than original documents. Again, according to the OECD, this simplification is a source of additional risks in the current context.
The risk of scams and identity theft is also high. In many cases, it is the tax administration that has been responsible for administering government assistance payments. However, the way these payments are processed can encourage criminals to commit individual or corporate identity theft with the intention of redirecting cash payments to their addresses or accounts, the report says. Another form of theft is the impersonation of government bodies, in this case the tax authorities, to commit fraud.
The report even warns of the risk of internal fraud. Social distancing rules, increased financial pressure and often limited supervision are all factors that can lead some staff members to commit fraud by sharing taxpayer information or diverting public resources or assets," the report explains.
There are also, according to the OECD, more privacy risks due to office closures and remote working, which increase the likelihood that tax authorities will “lose control” of certain sensitive tax and personal information.
In summary, the OECD advises tax administrations to be particularly vigilant during this period and to focus on co-operation with other government agencies in carrying out controls.
Possible mitigation measures include the use of multi-factor authentication for individuals or businesses to access government assistance payments.
It also suggests that tax administrations should conduct awareness campaigns on the risks of scams, but also remind taxpayers of the penalties incurred in the event of false declarations.
See the report: https://bit.ly/2M49ybE (Original version in French by Marion Fontana)