TAKS faces oversight challenges in Faroe Islands as National Audit Office reports limited capacity

Currently, TAKS (the Tax Authority in the Faroe Islands) faces limited capacity to oversee all transactions that do not go through Faroese financial institutions and that need to be reported for taxation. This was confirmed by the National Audit Office in its 2023 annual report.

The Ministry of Finance agrees on the necessity to strengthen oversight and will discuss with TAKS the possibility of implementing automated monitoring systems within TAKS’s framework.

TAKS cannot review all information regarding securities transactions that it receives. Due to the overwhelming volume of data, TAKS must prioritize which transactions to investigate further. The authority has complete confidence in the information provided by financial institutions.

The National Audit Office has noted that under current processes, TAKS’s ability to carry out effective oversight is constrained.

Moreover, the Ministry of Finance emphasizes the need to enhance TAKS’s monitoring capabilities. It is likely that many securities transactions occur online through foreign providers, where profits should be reported to TAKS, as indicated by the National Audit Office.

Overall, the Audit Office observes that the issue of whether capital gains declarations are accurate largely hinges on trust rather than actual oversight. It recommends bolstering the monitoring of capital gains.

In August, the government informed the National Auditor that TAKS has acknowledged its limited capacity for oversight and will prioritize its resources effectively to ensure broader applicability. TAKS aims to strengthen its monitoring, especially as capital gains are increasing, as stated in the National Auditor’s annual report.