Control of electronic commerce

Electronic commerce (e-commerce) is a rapidly spreading method of sale of goods and services, which was used by every fourth inhabitant of Lithuania in 2013-2014. Taking into account the growth trends in this sector and seeing a medium for tax evasion, the National Audit Office has carried out an audit to evaluate the organization of control of e-commerce.

"With all responsibility, I would like to warn future governments that the current tax collection mechanism does not guarantee that Lithuania will get the value added tax due thereto on electronic services. In addition, this question is often beyond the limits of national jurisdiction. Understanding that we cannot be prophets in our own country, we will take the initiative to raise it at the European Union level,” said Auditor General Arūnas Dulkys summing up the audit results. “It should also be noted that although Lithuanian authorities do introduce e-commerce innovations, individual institutional initiatives will not be sufficient, having in mind the arrival of a huge wave of this type of commerce.”

According to auditors, the authorities taking part in the control of e-commerce should take action to create a mechanism to ensure coordinated sharing of experience in electronic commerce. Otherwise, there is a risk of duplication of work and irrational use of resources. Two years ago it was proposed to sign agreements that would enable exchange of information among authorities investigating violations and to set up a permanent inter-institutional working group whose members would together investigate violations in e-commerce. Unfortunately, none of the proposed prevention measures has been implemented.

There are a number of practical questions concerning the control of value added tax revenue received for electronic services and the provision of conditions for service providers to properly fulfil their tax obligations. These issues should be addressed at the European Union level. The National Audit Office will forward its insights on issues that may become serious problems in future to the European Court of Auditors.