A rapid and effective solution to VAT fraud
RTvat believes that a pan-EU VAT fraud solution can be brought into effect very rapidly, essentially using existing technology that has been developed by the card associations and fraud control organisations.
The primary elements are:
- A commitment to moving all VAT collection to ‘real time’ – payable at the time of settlement of the transaction.
- Give similar ‘real time’ credits to buyers for their input VAT so there is no little cash flow implication for businesses.
- All intra-EU international transactions to be subject to VAT in seller’s country, with off-setting credit, for the same amount, in the buyer’s country – when tax settlement and collection is on a ‘real time’ basis, the traditional objections to implementing the definitive VAT system become redundant.
- Safeguard all data in a new network of servers in each member country, with simple interfaces for tax authorities, linked into one central server. The current legacy systems of the tax authorities are in serious need of updating to modern data standards. By creating this network of servers, each tax authority is brought up to date, while respecting all local requirements.
- Increase all current data protection and privacy law compliance capability.
- Establish a neural network for early identification and investigation of suspicious transactions by tax authorities and law enforcement, based upon existing fraud identification technology.
- A payment option based around business debit cards, directly linked to VAT numbers for immediate payments and claims. This would also have the side benefit of easing compliance procedures for SMEs – and can create a cost-effective overall accounting solution for them.
These steps will eliminate carousel fraud, increase the overall tax yield by making the tax system more secure, and generate up-to-date control data as well as securing and guaranteeing all payments.
The current €120 billion in losses will quickly disappear but, in addition, the overall management of the tax system will improve and cross-border commerce will be more straightforward for legitimate traders.
"Across Europe, efforts are focusing on the better exchange of information between national police forces and customs officers, though contra trading makes that harder than ever. Longer term, says European Union tax commissioner Laszlo Kovacs, the EU will need to change its VAT system to prevent the fraud.”
The Guardian, Tuesday May 29 2007
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