Full application of OIB (Personal Identification Number)

Within the state administration reform, the enforcement of the Act on Personal Identification Number has marked the beginning of the procedure of introducing the personal identification number (hereinafter referred to as "OIB") into the legal system of the Republic of Croatia.
 

Within the state administration reform, the enforcement of the Act on Personal Identification Number has marked the beginning of the procedure of introducing the personal identification number (hereinafter referred to as "OIB") into the legal system of the Republic of Croatia.

The goal of introducing the OIB has been to create a unique person identifier, which would be legally accepted by public legal bodies of the Republic of Croatia. As a result of creating the unique person identifier in all official records, the prerequisites are made for computer data exchange among legal public bodies. Only by computer data exchange can public legal bodies exchange, economically and efficiently, necessary data from official records for timely and consistent implementation of all administrative, tax and criminal proceedings. Considering the above mentioned, the OIB has been recognized as a strong instrument which will, through rapid and timely data exchange:

- enable a systematic fight against corruption by comparing the current property acquisition and the existing justified means for the acquisition thereof,
- create a fair system of social allowances based not only on income census but also on property census, and thus enable the detection of illegal requests for social benefits,
- enable a fair taxation system which will, by comparing reported income and receipts with the procurement of property or expenditure of funds for consumption, point at the reality of the reporting tax obligations,
- enable the monitoring of unreported but taxable transactions as a tool used in combating grey economy and, by the above-mentioned, create a legal system based on taxable persons and citizens' fairness and confidence in the efficient tax and legal system of the Republic of Croatia.

Within the procedure of introducing the OIB, the Tax Administration has two roles:

1. Tax Administration is a body responsible for the assignation of the OIB and registration of the OIB, that is:
- Determination and assignation of the OIB to all living persons on January 1st 2009
- From January 1st 2009, assignation of the OIB to all "new" persons when they are originally being registered (birth registry, competent bodies for registration of the establishment) usually without having to come directly to the Tax Administration
- Exchange data on the OIB with public legal bodies in order to register the OIB in official records
2. Full application of OIB in tax proceedings.

The procedure of introducing the OIB, according to legal provisions, has been carried out in two phases. The first phase has comprised determination and assignation of the OIB to all living persons with the delivery of the OIB Certificate. The first phase started on January 1st 2009, and was carried out before the deadline since the final OIB Certificates were delivered during June 2009. The first phase of introducing the OIB already pointed at a series of problems in the legal system of the Republic of Croatia, and thus at the justifiability of a decision on the introduction of the OIB into the legal system of the Republic of Croatia. Due to the assignation of the OIB, it was necessary to reach the data, by comparing a series of different data, on the identity of living citizens and existing legal persons and on their valid addresses of domicile and headquarters. Regarding the problems that were noticed (different ways of registering persons, non-updated data on the registration of death, on the registration of change of address, registration of legal personality instead of legal persons, etc), OIB was determined for and assigned to only those persons that could be properly identified in key official records. Therefore, the rest of the year 2009 was dedicated to updating of data on persons so that all persons that should have been given the OIB receive the one by the end of 2009.

The second phase of introducing the OIB comprised the procedure of registering the OIB in all official records of public legal bodies. In accordance with the provisions of valid regulations, the Tax Administration has been exchanging data with bearers of official records (records held by ministries, counties, cities and municipalities and other public legal bodies). Unfortunately, the procedure of registering the OIB was not going on smoothly- there were problems which had stimulated the introduction of OIB: registration of persons by name and surname without any further updating of data, the existing valid register of deceased persons, legal persons that no longer exist, registration of foreigners with minimum number of data which did not allow the identification of persons, registration of legal personality - premises, registration of crafts and trades by the right of registration of persons and other similar problems. Faced with the familiar but so far non-quantified problem, the Tax Administration, in cooperation with all public legal bodies, started the procedure of "purification" of registered data by stimulating solving and updating of all invalid registrations. The mentioned procedure of copying data to real living bearers (for example, registration of ownership right from the deceased to the heirs, registration of founders/ members of companies to identified persons, signalizing the moment of the change of data by monitoring all changes- change of surname, address, death date) - data purification - will enable the achievement of goals expected by the introduction of the OIB and its full application.

At the end of 2010 it can be definitely confirmed that the introduction of the OIB has stimulated the arrangement and updating of the whole legal system of the Republic of Croatia. However, the success of the conclusion of this second phase of the OIB introduction is not equal in all official record; there are still certain official records which have not entirely registered all persons via the OIB.

Two phases of introducing the OIB should have created prerequisites for the full application of the OIB. It can be said that the full application of the OIB represents a synonym for rapid, economical and efficient computer data exchange within a few seconds, which replaces the use of papers that a client usually submits in the proceedings. In order to have a proper computer data exchange based on legal regulations, it was necessary to create a legal framework for such a data exchange. Regarding this, the Tax Administration has passed the Amendments to the Tax Administration Act, prescribing documents as well as terms and conditions for the computer data exchange.

Considering the full application of the OIB in the tax proceedings, the following should be pointed out;
Tax Administration, on the basis of a new way of computer data exchange, has set up a system of the computer data exchange with bearers of property data. Property has a great significance in a series of tax proceedings:

1. Distraint - a collection measure appropriate considering the amount of debt, all property included, possible verification of a request for the tax debt write-off due to low income
2. Supervision - covering the related companies
3. Income assessment - by comparing the procurement of property and funds for consumption with reported income and receipts
4. Determination of income tax and profit tax - monitoring the way of declaring the tax allowable expenses (cars, vessels, apartment...)
5. Fees - issuing certificates of exemption from paying court and notary public fees, deciding on the exemption from paying administrative fees
6. Real estate transfer tax - establishing the right of exemption

In this moment, the Tax Administration is electronically linked with:
- the records of the registered passenger cars (Ministry of Interior),
- the records of the owners of airplanes (CCAA- Croatian Civil Aviation Agency),
- the records of the owners of securities (Central Depositary and Clearing Company),
- the records of the registers of burden on movable property (Financial Agency- FINA) and
- Court registers regarding the data on founders/members of companies,

and currently the electronic linkage with:
- Land Registry,
- Vessel Registry and
- Banking system
is underway.

In order to establish the electronic linkage, the Tax Administration concludes the prescribed documents, seeking, as well, the consent from the Croatian Personal Data Protection Agency, in order to protect personal data.

Besides the procedure of linking with the records on property, the system of systematic monitoring of interesting events regarding tax matters in the environment (news portals, media, press) has also been set up within the Tax Administration. This system enables the monitoring of important events related with taxable persons, which are registered via the OIB, and refer to the activity and behaviour of taxable persons. Such information represents important but unverified information for the Tax Administration, which will, depending on their significance, be verified subsequently by initiating tax audit procedures.

On the basis of downloading the data on founders/members of companies, the Tax Administration has produced programme solutions for monitoring related companies and related chains specifically due to a possibility of monitoring business relationships between companies.

Furthermore, the establishment of the computer data exchange enables two-way communication between the Tax Administration and linked records:

1. records report on interesting events regarding tax matters to the Tax Administration as soon as they happen (Tax Administration disposes of necessary information within several seconds) and
2. Tax Administration makes a query by OIB for the needs of tax proceedings implementation (seizure, audit, exemption from paying administrative fees, exemption from paying real estates transfer tax etc), institutions deliver the answer on the property properly registered in the records of competent institutions within the deadline of several seconds.

All communication is carried out without using any papers, without delivery costs, without waiting for the reply and without going directly to the institutions that keep necessary data, and it all happens within several seconds. Such a data exchange enables tax procedures to be fast and efficient because:

- unnecessary time is not wasted for writing official letters on data delivery as well as for collecting data, which reduces operational costs and simplifies the administration,
- it enables the processing of far more files,
- it excludes the discretionary right in tax procedures implementation, since the system recognizes taxable persons with disproportion between their reported income and receipts and property acquisition and spending funds,
- it enables the efficient seizure by timely knowledge of property acquisition and
- it enables timely disposition of data on person's property, which is necessary for deciding on the exemption from paying administrative, court and notary public fees.

According to the above-mentioned, the full application of the OIB in tax proceedings starts as planned, after the usual closing of the accounting year 2010, that is after the opening of year 2011 (January 25th 2011). The data exchange with the mentioned date will be realized at its greatest extent, with all previously mentioned institutions being prepared for the computer data exchange. However, since the Tax Administration determines taxes during the acquisition of taxable property, some alternative solutions have been made for use in order to find out more data on the property in question, until the mentioned registers are prepared.

The full application of the OIB will also contribute to the fight against corruption considering the ability of the Tax Administration to compare, in the moment of property acquisition, the value of the acquisition with justified sources of the property acquisition and, depending on that, to initiate appropriate proceedings.

The full application of the OIB will be realized in some other proceedings as well. Thus, for example, the new way of performing distraint of monetary means has been set up on the OIB as a key identifier in finding data on accounts and, with this, of monetary means the enforcement debtor disposes of.

The full application of the OIB, in accordance with the Economic Recovery Plan, should also contribute to the procedure of determining social rights within deadlines prescribed by the Economic Recovery Plan, and based particularly on the ability to find data on property, which has already been established in tax proceedings.

Finally, the greatest value of the introduction of the OIB should definitely be pointed out. The unambiguous registration of persons via the OIB and the existence of the base of gathered and constantly updated data on persons (Register on the OIB in the Tax Administration) enable all public legal bodies, according to their legal authorities, to constantly update their records. This ensures a successful and proper implementation of procedures (delivery on proper addresses, initiating procedures immediately upon a decision on inheritance, deletion of a legal person), which will, in the long term, help to overcome problems existing so far that have initiated the introduction of the OIB (absence of a central linking data base, inefficient, periodical and fallible data exchange).

Further development of the system of the full application of the OIB will be performed in accordance with the readiness of institutions, and thus of procedures within their competence, for the computer data exchange. For taxable persons and for users of the state aid system, this system will facilitate the administration, enable efficient mechanisms of the revision of realized rights, improve services for taxable persons and citizens and contribute to the general satisfaction and confidence in the tax and legal system of the Republic of Croatia.

 

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