VAT Collection Research Articles

Wybrane problemy poboru VAT w orzecznictwie Trybunału Sprawiedliwości Unii Europejskiej

The article deals with some problems related to VAT collection raised in numerous judgements of the Court of Justice of the European Union. This is mainly due to the close connection of the EU general budget with the amount of VAT collected in individual member states. The aim of the study is to identify EU provisions as well as guidelines developed by the judgements of the Court of Justice of the European Union regarding the requirement and measures that secure proper VAT collection.

Реформирование механизма взимания НДС в агропромышленном комплексе Украины

Реформирование механизма взимания НДС в агропромышленном комплексе Украины

Všeobecný přenos daňové povinnosti a cash-flow veřejných rozpočtů České republiky

Reverse charge is currently used as a measure against VAT carousel fraud. Its extension to all goods and services is discussed among the tax policy makers at the national and EU level. Opponents of general reverse-charge argue that this method of VAT collection would completely change the nature of the VAT system. One of the practical drawbacks of reverse charge is the negative impact on the cash flow of the public budgets. This article quantifies the average monthly financing available to the State thanks to delayed repayments of input tax to VAT payers under the normal VAT system. This amount equals to almost 53 billion CZK and represents the negative impact of the general reverse charge on the cash flow of the public budgets. A change in the deadline for remitting VAT or introducing VAT advances to be paid prior to the final tax payment would reduce the negative influence on public finances.

Efficiency of a single-rate and broad-based VAT system: the case of Bosnia and Herzegovina

The aim of this paper is to analyze the performance and efficiency of the VAT system in B&H and explore the effects of internal and external factors influencing VAT collection. The VAT system in B&H is a consumption-type, single-rate and broad-based system. Ever since its implementation, VAT collection in B&H has been subject to strong oscillations, from an extremely high performance in the first two years after the introduction, to a sharp drop at the beginning of the crisis. After a temporary recovery, VAT collection declined in the last quarter of 2012 and has been negative ever since, although a weak recovery of the B&H economy was observed in 2013. The key hypothesis is that the high efficiency of the broadbased and single-rate structured VAT system may be neutralized by the country’s specific circumstances and VAT policy design. Applying a set of indicators for VAT efficiency analysis, developed by IMF, OECD and EU, we find a deterioration of the components of the policy gap caused by derogations of the VAT Law, and an increasing compliance gap, due to an increase of the VAT debt and tax evasion, in consequence of poor policy design in the field of excises. As a result of the influence of the country’s specific circumstances and its VAT policy design the identifiable current net losses on VAT in 2013 amount to 4% of net VAT collection or 0.4% of GDP. The analysis presented in the paper proves the main hypothesis that a VAT design, even when it is close to theoretically ideal concept, cannot on its own produce a high level of VAT efficiency and performance.

Carousel Frauds in the Czech Republic

Collection of value added tax represents for all EU Member States an important part of the state budget, the share of which is mostly higher than 20%. Growing state expenses and endless economic and financial crisis have resulted in deep dependence on EU Member States revenues from VAT. Organized groups of tax fraudsters abuse the loopholes in current tax legislation to achieve unjust enrichment. This paper describes the practices of tax frauds in VAT collection most frequently used in the Czech Republic, summarizes measures adopted by tax administration and evaluates the effectiveness of their application.

Value Added Tax Evasion and Illegal Recovery Cases in Lebanon

In order to increase the treasury's revenues to satisfy the needs of increased expenditures in the public sector, the government is planning to raise the VAT rate two percentage points, an increase that will constitute an additional burden on the consumer's shoulder. A questionnaire is prepared and a qualitative analysis is made in order to detect the ways through which some taxpayers sneak to evade paying the VAT or to unjustly gain money through some illegal recover. To access the aforementioned cases it was imperative to conduct a fieldwork with officials in VAT collection and derivative processes. The two basic references in this respect are the customs authorities and the VAT directorate in the ministry of finance. Solutions are suggested in order to combat VAT evasion to limit as much as possible the waste in the treasury's revenues.

Real-Time Collection of the Value-Added Tax: Some Business and Legal Implications

Recent estimates of the level of VAT fraud in the EU are commensurate with the EU budget. With the Green paper on the future of VAT, the European Commission stressed the urgency and necessity of comprehensive VAT reforms. This paper analyses the business and legal implications of the recently proposed split-payment mechanism, which, if implemented, would move VAT’s method of collection to real-time. The discussion is positioned in the context of two increasingly visible trends in the EU – the general shift towards greater reliance on indirect taxation and the growing popularity of electronic payment instruments. The potential implementation of VAT withholding would be a radical reform, given its shift of the taxation system from voluntary to forced compliance. We argue that, on the one hand, real-time VAT collection would constitute a potent preventive measure against VAT fraud, which could generate synergetic effects within SEPA, and further deepen integration through the harmonisation of VAT policies. On the other hand, real-time audit/refund would require tax authorities’ access to confidential business information that may be incompatible with EU privacy rules. The trade-off between efficient tax collection and privacy concerns mirrors the general debate on data protection in a cashless economy.

The Future of the European VAT System

The EU VAT system appears to be sensitive to fraud and the European Commission has recently raised the issue of reforming the “transitional VAT regime” currently in force. In this article, the author endeavours to contribute to this discussion by evaluating the various options for the future EU VAT system, including taxation based on the origin principle and the introduction of the generalized reverse charge mechanism, a supplementary EU VAT, and real-time VAT collection (RTvat).

Technology Can Solve MTIC Fraud – 3 and Final

In his recent article “Technology Can Solve MTIC Fraud – VLN, RTvat, D-VAT certification”, Richard Ainsworth discussed the three main options that claim to be capable of resolving missing-trader VAT fraud, and concluded that real-time VAT collection (RTvat) is the only solution that is actually capable of preventing that type of fraud and limiting several other forms of fraud. In his follow-up article, Chris Williams briefly responds to Richard Ainsworth’s reservations as regards the central auditing function that forms part of RTvat’s proposal for real-time VAT collection. Richard Ainsworth has the final word in this discussion on the merits of real-time VAT collection in general and RTvat in particular.

Technology Can Solve MTIC Fraud – 2

In his recent article “Technology Can Solve MTIC Fraud – VLN, RTvat, D-VAT certification”, Richard Ainsworth discussed the three main options that claim to be capable of resolving missing-trader VAT fraud, and concluded that real-time VAT collection (RTvat) is the only solution that is actually capable of preventing that type of fraud and limiting several other forms of fraud. In this follow-up article, Chris Williams briefly responds to Richard Ainsworth’s reservations as regards the central auditing function that forms part of RTvat’s proposal for real-time VAT collection. Richard Ainsworth has the final word in this discussion on the merits of real-time VAT collection in general and RTvat in particular.

Technology Can Solve MTIC Fraud – VLN, RTvat, D-VAT certification

Technology can solve missing-trader intra-Community (MTIC) fraud. In the early 2000s, MTIC fraud mainly concerned cell phones and computer chips. By 2006, MTIC fraud was targeting services (transfers of CO2 permits and VoIP services) and was no longer limited to the European Union. MTIC fraud is now fully digitized (the supply, the movement of the product and the funding). Technology is both the causative agent and the most effective countermeasure for this type of fraud. The details of the three major technology-intensive approaches for solving MTIC fraud are known since 2007: the VAT locator number (VLN); real-time VAT collection (RTvat); and certified tax software (Digital VAT or D-VAT). This article endeavours to contribute to the debate that the European Commission has opened on this topic with its recent Green Paper, by comparing and contrasting these proposals.

VAT collection efficiency in Poland before and after accession to the European Union–a comparative analysis

The principal aim of this study is to evaluate the impact of EU accession on VAT collection efficiency in Poland. For the purposes of the analysis the article is divided into three parts. The first addresses the Polish economy in the years 2001–2006, and describes the main macroeconomic indicators (GDP, import, export, individual consumption expenditure, public consumption expenditure, inflation rate and unemployment rate). The next section presents a review on the most significant VAT modifications, implemented in 2004. The last section estimates, on the basis of certain indicators, the VAT collection efficiency in the years 2001–2006. The measures employed in this section include: VAT productivity and VAT efficiency ratio. Furthermore, the section presents the VAT to GDP ratio and the structure of tax receipts measured by the share of major taxes in the total tax collection. The main conclusion drawn from the analysis is that in the period preceding accession the economic cycle did not favuor VAT performance. Since 2004, both improved economic situation and tax construction changes had been the main factors of VAT revenue increase. In the years following accession the VAT productivity and VAT efficiency ratios increased by 5,4 and 7,8 percentage points, respectively. It was the highest rise of these indicators in the period analyzed.

Is the Completion of the EU Single Market Hindered by Vat Evasion?

The planned full-scale implementation of the origin principle with the cross-border pre-tax system would lead, ceteris paribus, to changes in VAT revenues in the individual EU countries. For instance, the member countries with trade surpluses and higher VAT rates would be significantly better off. For this reason, a clearing mechanism is necessary to rectify this type of revenue imbalance among the EU nations. The introduction of the Single Market in 1993 appears to have further encouraged firms' and households' evasive behaviour in paying VAT in the EU. In order to estimate its relevance, this study quantifies the annual amount of hypothetical VAT revenues for the individual countries on the basis of the national accounts data. The relation between the calculated hypothetical and the (current) collected revenues in a fiscal year largely determines the extent of VAT evasion in a country when the time-lag problem between the creation of the tax liability and the VAT collection in cash terms can be adjusted. The macroeconomic clearing is supposed to take place based on the share of hypothetical revenues of the member countries. Consequently, such a system seriously suffers from adverse incentives for the individual nations since countries with a lower evasion ratio than the weighted average of all EU countries would lose VAT revenues, whereas those with a higher evasion ratio would gain.

Coordinating VATs Between EU Member States

The paper surveys the characteristics of the common European VAT system, proposed by the EU-Commission to overcome the weaknesses of the transitional European VAT system, which was enacted in 1993 and is still in force. We argue that a harmonized VAT rate will generate substantial costs for EU member states to meet national budget requirements and that the revenue sharing mechanisms will generate adverse incentives to national efforts in VAT collection and control. A comparison of the Commission proposal with four alternative VAT regimes favours a modified VIVAT system as an attractive compromise.

Coordinating Vats between EU Member States

The paper surveys the characteristics of the common European VAT system, proposed by the EU-Commission to overcome the weaknesses of the transitional European VAT system, which was enacted in 1993 and is still in force. We argue that a harmonized VAT rate will generate substantial costs for EU member states to meet national budget requirements and that the revenue sharing mechanisms will generate adverse incentives to national efforts in VAT collection and control. A comparison of the Commission proposal with four alternative VAT regimes favours a modified VIVAT system as an attractive compromise.

Measurement of Value Added Tax Evasion in Selected EU Countries on the Basis of National Accounts Data

The size of tax evasion and fraud appears to be increasing steadily in the EU. To a certain extent, the completion of Single Market has further encouraged firms' and households' evasive behaviour in paying value added taxes in the EU Member States, whereas such efforts have traditionally been most pronounced in the field of corporate and personal income taxation. This study primarily deals with the quantification of the VAT evasion and fraud in the EU. On the basis of the national accounts data, it suggests a novel way of estimating the annual amount of hypothetical VAT revenues for the individual EU countries. The relation between the calculated hypothetical and the (current) collected revenues in a fiscal year largely determines the extent of VAT evasion and fraud of a country, when the time-lag problem between the creation of tax liability and the VAT collection in cash terms can be adjusted.

What is VAT?

Over 50 per cent of the EC budget comes from a proportion of the Member States' VAT. Each Member State has a unique constellation of VAT rate, collection and remission procedures and prosecution policies. Some of these constellations create potential ‘internal tax havens’ within the Single Market. The author argues that an effective strategy to protect the finances of the Community after the transition period would require (i) the harmonisation of some of the collection procedures, (ii) improved mutual assistance and (iii) the setting of some minimum standards of prosecution throughout the Community.