Richard Cornelisse

Posts Tagged ‘Value-added tax’

60% of companies say VAT/GST have a negative impact on their business

In Audit Defense, Benchmark, EU development, Indirect Tax Automation, Indirect Tax Strategic Plan, Tax News, Technology, VAT automation, VAT planning on 24/07/2014 at 6:28 pm

The importance of indirect tax has increased over the last couple of years. While the rates for direct tax, corporate income tax, are decreasing, the rates for indirect tax keep rising.

Time for Richard Cornelisse, editor of Global Indirect Tax Management, to act on that: ‘At multinational companies we’re easily talking about amounts of over 5 billion euros of indirect tax flowing through the books.

Yet according to big4 surveys, the related control mechanisms are still inadequate. Not only can an error in the accounts lead to major additional tax assessments and substantial penalties, with amounts like these, it can be devastating for the reputation of a listed company.’

The global bench mark study on VAT / GST 2013 of KPMG among multinationals (clients and relations), inter alia, shows that most companies haven’t yet developed an effective VAT/GST approach.

Tax Authorities, due to technological innovations, have become increasingly better in executing their tax audit. The probability that the Tax Authorities will issue additional assessments and penalties in the near future because errors in indirect tax are detected, increases by the day.’

Isn’t it strange that the indirect tax still isn’t high on the agenda of the Head of Tax and the CFO?

Cornelisse: ‘It is indeed. Not only are the amounts in the indirect tax cycle continuingly rising internationally, these surveys also reveal that the Tax Authorities, due to technological innovations, have become better at executing their tax audit.

The chance that the Tax Authorities will issue additional assessments and penalties in the near future because errors in indirect tax are detected, increases by the day.’

Still, companies hardly seem to react.

Cornelisse: ‘On the one hand it’s understandable. Because of the structure of determination and control within organizations, indirect tax is dealt with completely differently than direct tax.

The Head of Tax is responsible for all taxes in the company, but it appears that the main focus is on direct tax. The Indirect Tax Function often reports to the Head of Tax, who, in turn, reports to the CFO. This is one of the reasons that hardly any KPIs are determined for VAT/GST and the CFO almost exclusively attends to direct tax regarding tax risks.

The CFO has a lot on his plate and lines of reporting often fail to sufficiently pass on the risks of indirect tax and the necessity of managing this adequately.’

‘The chance that the Tax Authorities will issue additional assessments and penalties in the near future because errors in indirect tax are detected, increases by the day.’

Breaking the silo structure

But doesn’t the CFO’s financial auditor point out the large risks associated with insufficient control of indirect tax?

Cornelisse: ‘That is indeed strange since I assume that the results of the benchmark studies are not only shared with clients, but especially within the organization itself, including colleagues in the audit department.

In terms of quality and providing integrated service, it can be expected that a position be taken each year concerning materiality and thus the necessity for further examination during the annual audit.

It is remarkable, however, that regarding indirect tax, the tax advisory departments of the Big4 mention the increasing risks of additional assessments, penalties and loss of reputation because risks are rising and KPIs and controls of indirect tax are lacking, but that this knowledge is hardly ever taken into account during the financial statement audit.

The CFO assumes that the knowledge acquired within the walls of the large accountancy and tax consultancy firms is shared, but the tax advisors appear to be prone to focus solely on serving their own circle of clients and to a far lesser extent on strengthening other services within the organization itself. Focus on one’s own expertise is good on the one hand, but it can also lead to reduced transfer of information.’

Isn’t this where the financial auditor comes in?

Cornelisse: ‘It’s understandable from the financial auditor’s perspective that the accounting firms don’t always deploy the knowledge available in their own tax advisory department when performing the financial statement audit.

The tax advisors primarily address their own clients, for which personal KPIs such as sales turnover must be achieved, and therefore have an individual higher rate structure. The financial auditors apply sharp rates in their market competition, and expensive internal staff hours spent on control of indirect tax are limited as much as possible. It costs a lot of money to hire internal knowledge and that money isn’t always available in economically difficult times.

They have, however, a responsibility, especially when it comes to managing reputational damage.’

If the facts say that more control, more KPIs are required in monitoring the indirect taxes, then why doesn’t the CFO take that on?

Cornelisse: ‘The most important reason is that the CFO has a lot on his plate. Indirect tax has no priority.

Due to economical circumstances, choices have to be made regarding budgets for internal control. And because indirect tax has traditionally received little attention, it will surely not get more in times of crisis.

The deployment of expensive fiscal knowledge therefore usually remains limited to control of direct tax.’

‘The Indirect Tax Function is aware of the fact that it is understaffed and that budget is too limited to optimally execute its tasks, but they often don’t know how to change this and get it on the agenda of the CFO.

Surveys are alarming

If the risks are truly this high, then shouldn’t it receive more attention from the CFO?

Cornelisse: ‘That’s exactly the reason I started the Global Indirect Tax Management initiative. It’s not that the problem is unknown among the multinationals, but they just don’t share information sufficiently.

The Indirect Tax Function is aware of the fact that it is understaffed and that budget is too limited to optimally execute its tasks, but they often don’t know how to change this and get it on the agenda of the CFO.

The surveys of the Big4 are clear: we are talking about extremely large amounts of money that lack appropriate control, but because KPIs have never been developed for this particular purpose, the risks remain outside the CFO’s field of view.

Source: KPMG Indirect Tax Compliance Services – go beyond the data

  • “Indirect tax is the third largest item of working capital
    1. Sales
    2. Cost of sales
    3. Indirect tax
  • 60% of companies say VAT/GST have a negative impact on their business
  • Only 1 in 8 businesses have a global head of VAT/GST that has visibility over VAT / GST returns prepared locally”

Source: EY Managing indirect tax data in the digital age

“External drivers

  • Governments are increasingly relying on indirect taxes to meet their budgetary needs
    VAT rates have increased worldwide in recent years, and new indirect taxes are being introduced in many countries for sectors such as banking and energy
  • The “fair tax” debate has put companies’ tax affairs firmly in the media spotlight – drawing intense scrutiny not only from tax administrations, but also from regulators, investors and even the public
  • Tax and customs administrations are focusing more than ever on full compliance and using risk analytical tools to target their resources to tackle tax leakage and tax avoidance. They are collecting more taxpayer data and doing more with it”

One of the tools the Global Indirect Tax Management initiative offers, are aimed at achieving better awareness.

The fact that direct and indirect tax work in a different way must also be taken into account.

The Head of Tax should be more involved in the Indirect Tax Function. The Head of Tax mainly gets his information from corporate finance and not so much from other departments. And that is precisely where the indirect tax is managed and must be operated. It is therefore often not visible for the Head of Tax how important the controls on indirect tax are.

If the Head of Tax and the Indirect Tax Function would figure out how to cooperate more efficiently, they will also bring indirect tax more into the spotlight of the CFO.’

‘Just consider: a mistake of one percent can make the difference between profit and loss for a multinational company. Explain that to your shareholders.’

Carried by the organization itself

How can change be accomplished?

Cornelisse: ‘It’s essential that change comes from the organization itself. An advisor can repeat this over and over, but if it isn’t carried out within the organization, by the people who actually have to work with it, nothing will change.

It starts with the people in the organization becoming aware of the amounts that are at stake and the risks of something going wrong. Big4 surveys show unanimously that we’re easily talking about amounts of 5 billion euros concerning indirect tax. Benchmark studies repeatedly create the same picture: too little control, too few KPIs and when a mistake is made in the control, it usually concerns large amounts of money.

A mistake of one percent can make the difference between profit and loss for a multinational company. Explain that to your shareholders.’

The reason is that both from within the organization – that is, via the Indirect Tax Function, the Head of Tax and the internal audit – and from outside – that is, financial auditor – insufficient signals reach the CFO in order to raise priority of indirect tax.

Cornelisse: ‘That’s right. And that deadlock must be broken. The internal and external stakeholders are all chains in the process and if one isn’t cooperating, change is difficult to accomplish.

It is essential that financial auditors also read the surveys, acknowledge the risks and discuss them with the CFO. The best outcome would be if the indirect tax would be controlled by default in audit or if a stand point would be taken not to do that.

In case control is required, all methods and tools developed by one’s own Tax Advisory Department of the Big4 – (technology, methods and tools such as reconciliations and data analytics including auto generated reports based on the right data sets)  are to be deployed in order to ensure overall quality of service.

This influences the CFO externally, can bring about change top down and can lead to new instructions for internal audit and Head of Tax. Of course the indirect tax function itself has to improve its working relation with the head of tax.

As a result, the Indirect Tax Function can have the tools (mandate, resources, budget etc.) necessary to execute its tasks adequately.

Richard Cornelisse is editor of Global Indirect Tax Management.

Indirect tax function effectiveness: If one isn’t Cooperating, Change is Difficult to Accomplish

In Audit Defense, Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls on 10/06/2014 at 12:00 pm

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If the risks are truly this high, then shouldn’t it receive more attention from the CFO?

613-01535203The surveys of the Big4 are clear: we are talking about extremely large amounts of money that lack appropriate control, but because KPIs have never been developed for this particular purpose, the risks remain outside the CFO’s field of view.

One of the tools the Global Indirect Tax Management initiative offers, are aimed at achieving better awareness.

The fact that direct and indirect tax work in a different way must also be taken into account.

The Head of Tax should be more involved in the Indirect Tax Function. The Head of Tax mainly gets his information from corporate finance and not so much from other departments. And that is precisely where the indirect tax is managed and must be operated. It is therefore often not visible for the Head of Tax how important the controls on indirect tax are.

If the Head of Tax and the Indirect Tax Function would figure out how to cooperate more efficiently, they will also bring indirect tax more into the spotlight of the CFO.’

How can change be accomplished?

Cornelisse: ‘It’s essential that change comes from the organization itself. An advisor can repeat this over and over, but if it isn’t carried out within the organization, by the people who actually have to work with it, nothing will change. It starts with the people in the organization becoming aware of the amounts that are at stake and the risks of something going wrong.

Big4 surveys show unanimously that we’re easily talking about amounts of 5 billion euros concerning indirect tax. Benchmark studies repeatedly create the same picture: too little control, too few KPIs and when a mistake is made in the control, it usually concerns large amounts of money.

A mistake of one percent can make the difference between profit and loss for a multinational company. Explain that to your shareholders.

’The reason is that both from within the organization – that is, via the Indirect Tax Function, the Head of Tax and the internal audit – and from outside – that is, financial auditor – insufficient signals reach the CFO in order to raise priority of indirect tax.

Cornelisse: ‘That’s right. And that deadlock must be broken. The internal and external stakeholders are all chains in the process and if one isn’t cooperating, change is difficult to accomplish. It is essential that financial auditors also read the surveys, acknowledge the risks and discuss them with the CFO.

The best outcome would be if the indirect tax would be controlled by default in audit or if a stand point would be taken not to do that. In case control is required, all methods and tools developed by one’s own Tax Advisor Consultancy Practice are to be deployed in order to ensure quality.

This influences the CFO externally, can bring about change top down and can lead to new instructions for Internal Audit and Head of Tax. As a result, the Indirect Tax Function can have the tools, mandate, resources, budget etc. necessary to execute its tasks adequately.

Via Risks too High, Controls too Low – Interview / Richard Cornelisse

OECD’s guidelines on value-added tax find widespread support

In General, Macroeconomic effects of VAT, Tax News on 06/05/2014 at 8:41 am

AN IMPORTANT development in the VAT world occurred recently in the Japanese capital Tokyo, when 86 countries endorsed a new set of international guidelines, devised by the Organisation for Economic Co-operation and Development (OECD) committee on fiscal affairs, aimed at mitigating the risks of double taxation or unintended double non-taxation.

About 160 countries have adopted value added tax (VAT) systems over the years, and at the same time international trade in goods and services has expanded rapidly. This means greater interaction between VAT systems, and increased risks.

OECD deputy secretary-general Rintaro Tamaki said at the meeting of the OECD Global Forum on VAT in Tokyo that jurisdictions often used different VAT rules to determine which jurisdiction had the right to tax a cross-border transaction, or they interpreted similar rules differently. These differences had caused “severe obstacles” for international trade and investment and hinders economic growth, he said.

“Policy action to address this issue was urgently needed, and the OECD has therefore made it a key priority to develop consensus around internationally agreed principles for a coherent application of VAT to international trade.”

South Africa is one of the 86 countries that endorsed the guidelines.

Tax authorities and the business community realised as far back as the late 1990s that VAT rules required greater coherence to avoid burdens on global trade. The OECD’s work started in 1998 with the Ottawa Conference on electronic commerce.

The 2014 OECD international VAT guidelines state that not only electronic commerce poses challenges, but that VAT could distort cross-border trade in services and intangible assets more generally, as they cannot be monitored at border posts in the same way as goods.

The OECD guidelines focus on the neutrality of VAT and the definition of the place of taxation for cross-border trade in services and intangibles between businesses. They accept the widespread consensus that the destination principle is the international norm: revenue accrues to the country of import where final consumption occurs.

The guidelines encourage similar levels of taxation where businesses in similar situations carry out similar transactions, that VAT rules be framed in such a way that they are not the primary influence on business decisions, and where specific administrative requirements for foreign businesses are considered necessary, they should not impose a disproportionate or inappropriate compliance burden on the businesses.

Tax authorities are encouraged to apply tax laws fairly, reliably and transparently; to encourage compliance by ensuring the costs of complying are kept to a minimum ; and to deliver quality information.

PwC VAT leader Charles de Wet, who attended the Tokyo meeting, says SA is already adhering to the guidelines to a large extent.

The problem is that not all its trading partners in Africa are doing the same.

Several African countries also attended the Tokyo conference, including Kenya, Zambia, Ghana and Mozambique. It is not clear whether all of them endorsed the guidelines.

Mr de Wet says all the positive elements expected in the design of a good VAT system have been encapsulated in the guidelines.

“VAT is supposed to work through the production cycle and it should be borne by the end consumer of the product or service and not by business.” VAT is a major source of revenue for governments, which take a knock from under-taxation, but double taxation hurts trade.

“The boxes that need to be ticked include whether the system offers neutrality, certainty and efficiency,” says Mr de Wet.

“It is an important development in the VAT world, and it is important for traders and tax authorities to take note of where VAT is being positioned in the tax value chain,” says Mr de Wet.

South African Revenue Service spokesman Adrian Lackay says the guidelines offer revenue authorities greater certainty on how VAT should be imposed on cross-border services. Ignoring them could lead to “either double taxation or double nontaxation”. He says South African legislation will have to be amended in the near future to comply fully with the OECD guidelines, as domestic legislation is not yet aligned with them in certain instances.

These amendments will be done under the guidance of the National Treasury.

“Fraudulent VAT activities and refund claims, in particular, pose significant risks to the fiscus. These risks have to be managed continuously to protect the fiscus against abuse and fraud,” says Mr Lackay.

VAT collections in South Africa amounted to 26.4% of the government’s main sources of tax revenue in the 2012-13 fiscal year, compared with 24.7% in 2008-09. Total collections increased from R191bn in 2009-10 to R240bn in 2012-13.

From: OECD’s guidelines on value-added tax find widespread support | Business | BDlive by Amanda Visser

OECD to set out global guidelines on VAT | Economia

In EU development, Indirect Tax Automation, Indirect Tax Strategic Plan on 12/04/2014 at 8:39 am

The Organisation for Economic Co-Operation and Development OECD is to set out its new global standard for international VAT at a global forum in Japan next week

The guidelines will be presented to representatives from over 80 tax authorities at the second meeting of the OECD Global Forum on VAT in Tokyo on the 17 – 18 April, before being officially released on the 18th. “Value Added Tax is a key source of revenue for more than 150 countries worldwide, but the uncoordinated application of national VATs to international trade remains problematic,” the OECD said in a statement.

It said, “Governments are losing out on tax revenues due to under-taxation, while the risk of double taxation poses increasing obstacles to international trade, particularly in the booming international services trade.”

The guidelines are designed to advise of standards on key aspects of international VAT design. They will be based around the principles of neutrality from VAT for businesses both domestically and in an international context, and on ensuring that VAT on international transactions will only be imposed once, on destination.

The new guidelines are the latest in a series of reforms and announcements set out by the organisation to address the issue of international tax and tax avoidance.

In July last year it introduced sweeping tax reforms to stop multinational organisations abusing outdated tax rules.

In February, a global consultation on transfer pricing was launched, with the power to fundamentally change how taxpayers report their international activities.

Ellie Clayton

via OECD to set out global guidelines on VAT | Economia.

Higher up on the agenda of the CFO

In Audit Defense, Business Strategy, Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls, Technology, Uncategorized on 04/04/2014 at 6:10 pm

KEY Group new logo long

Dutch version

While direct tax rates are decreasing everywhere across the world, the rates for indirect tax keep rising. For an average multinational company, a small mistake can make the different between profit and loss.

Despite these significant risks, the control mechanisms for indirect tax remain insufficient.

This conclusion followed from various surveys conducted by the Big4. A multinational company has amounts of over five billion euros of indirect tax flowing through the books and an error of one percent affects the earning per share.

The Global benchmark study on VAT/GST 2013 of KPMG, inter alia, indicates that the majority of multinationals still haven’t developed an effective VAT-management. Thus, control on indirect tax is rather neglected.

Comparable Big4-surveys conclude that due to technological innovations, the Tax Authorities become increasingly better at performing their audit task. The chances for companies of receiving additional tax assessments and fines from the Tax Authorities in the near future increase by the day.

Noteworthy is that companies hardly respond.

CFOs give low priority to indirect tax in deciding over budgets for internal control. Indirect tax traditionally receives less attention and times of crisis most likely won’t change this pattern.

The most important reason for this lack of attention is that VAT is managed completely differently than direct tax. With regard to the control of tax risks, the CFO, incited by the Head of Tax, usually solely focuses on direct tax.

It is often unclear how this can be changed and how indirect tax risks can be moved higher up on the agenda of the CFO. The Head of Tax to whom is reported obtains its information on direct tax mainly from corporate finance and to a lesser extent from within the organization, while that is precisely where indirect tax is administered.

Therefore, it is to him not visible on a daily basis how vulnerable the control on indirect tax actually is. Improvement in collaboration can result in VAT risks being brought more into the spotlight of the CFO.

Perhaps the most peculiar – given the alarm bells rang by the tax consultants in the benchmark studies – is that the accountants rarely point out the significant risks and insufficiently inspect the indirect tax position.

The reason is that tax consultants of the Big4 predominantly work with their own clients, with their own revenue targets and with a higher rate structure.

Moreover, the accountants apply competitive rates that allow for little room for expensive internal working hours spent on control of indirect tax. This means that the CFO cannot readily assume that all knowledge is shared within the walls of the big accountancy and tax consultancy firms.

The CFO thus receives insufficient signals promoting higher priority for indirect tax both from inside and outside the organization.

How can this impasse be broken?

The internal and external stakeholders are all chains in the process and if one isn’t cooperating, change will be difficult to be created.

A first step would be accountants reading the surveys of their own firms, acknowledging the risks and discussing these with the CFO. Optimally, control of indirect tax should be included as a standard part of internal audit, ór the position should be taken not to include it.

If control is necessary, all products and methods of the respective tax consultancy should be deployed in order to assure quality. This reaches the CFO and can subsequently through ‘top down’ influences result in new instructions for internal audit and/or Head of Tax.

Following this path, the indirect tax function can gain the mandate, resources and budget required for proper execution of its functions. It is then up to the indirect tax function to improve the collaboration with the Head of Tax.

By Richard Cornelisse

Toolkit – Roadmap To Indirect Tax Function Effectiveness

In Business Strategy, EU development, Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls on 23/03/2014 at 1:08 am

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The first phase should include a zero measurement in which key risks are identified and the follow up includes the implementation of a TCF to mitigate these risks.

Verify indirect tax performance via:

A toolkit should enable to assess and evaluate in an effective and efficient manner the effectiveness of a company’s current control framework, document the ‘as is’ situation, provide a gap analysis and set of solutions to close gaps. A normative VAT Control Framework is used as a yardstick for comparison purposes and will indicate how the steps should be taken in an ideal world (gap analysis).

Trust, but verify is a form of advice given which recommends that while a source of information might be considered reliable, one should perform additional research to verify that such information is accurate, or trustworthy. Ronald Reagan

The deliverables should be supportive and in line with company’s overall Sox objectives and in full scope a project has to deliver:

  • Process Objective Matrix
  • Final VAT Risk Universe
  • Process flows
  • Indirect tax risk & control matrix
  • Preliminary improvement plan
  • Final Tax Control Framework documentation
  • Final Improvement plan and roll out timelines
  • Documentation of company’s Indirect Tax Strategic Plan

More insight about the ‘specific areas of investigation and samples questions’ can be found in attached PowerPoint presentation. This deck provide further insight of our work method and deliverables.

What should be in a toolkit:

  • Indirect Tax Maturity Scan
  • VAT Function Framework
  • Process Objective Matrix
  • Normative VAT Control Framework (Golden Standard)
  • Questionnaires (preferable online) has to be tailored for selective audience (scalable, worldwide operations or for specific function only):
  1. To assess Strategy Risks
  2. To assess Financial Risks
  3. To assess Operational Risks
  4. To assess Compliance Risks

See slides for further insight

Forum

Standard EU VAT Return

In EU development on 09/03/2014 at 8:40 pm

Stephen Smith - The Business Briefing

On 23rd October, 2013 the European Commission proposed that all of the 28 countries in the European Union introduce a standard EU VAT Return from 1st January, 2017.

The overwhelming case for a standard EU VAT Return is that it should simplify the administration of VAT for businesses operating in more than one EU country.  The existing situation where each country has designed its own VAT Return in its local language makes it extremely difficult for a business to perform the necessary VAT administration in each of the countries in which it operates.

The significance of this administrative burden is that it clearly acts as a barrier to trade.  It does not surprise me that only 13% of all VAT taxpayers in the EU submit VAT returns in more than one member state. If we have a truly standard VAT return throughout the EU then a UK company could refer to a version in English and use it as the model when considering completing the same VAT return in the language of another EU country in which it is registered or should be registered.

I asked Professor Rita de la Feria, who is the Chair in Tax Law at Durham Law School and Programme Director at the Oxford University Centre for Business Taxation, about the likelihood of the Commission’s proposals being accepted by the member states and she commented:

“I believe that it is most likely that the Commission’s proposals will succeed.  If they do not gather unanimous support, they might be approved under the “enhanced cooperation” procedure.  I don’t believe opposition will come from member states with high compliance levels, like Germany and the UK, but from countries that at present have been adopting a stronger stance on compliance.  In any event, even if approved only under enhanced cooperation and not applied to all member states, in my opinion this is a very significant and positive step towards facilitating and enhancing intra-EU trade, particularly for SMEs.”

I hope that this simplification will actively encourage businesses in all EU countries to register for VAT in many EU countries leading to a much needed expansion of cross-border trade within the single market.  As a provider of VAT training we have seminars that we could present throughout the EU.  The need to complete non-standard VAT returns in each country’s local language ironically presents us with a problem that restricts us from delivering seminars in other EU countries.

I eagerly await the introduction of a standard EU VAT return.

Stephen Smith

Managing Director

UK Training (Worldwide) Limited

The Business Briefing – UK Training – Standard EU VAT Return.

EU Commission – VAT collection and control procedures report

In Audit Defense, EU development, Indirect Tax Strategic Plan on 28/02/2014 at 3:32 pm

Introduction

  1. In 2011 the total amount of VAT revenue collected in the EU was around € 901 billion, which represented 7.1 per cent of GDP-EU-27 and 18.4 per cent of total tax revenue, including social contributions. The EU VAT system embraced around 26.5 million VAT taxable persons. The VAT-gap, which is the difference between the amount of VAT actually collected and the theoretically collectable amount of VAT, is estimated at 18.4 per cent of GDP-EU.
  2. In 2011, the VAT own resource represented 11 per cent of the EU revenue, being around € 14 billion. For the calculation of the VAT own resource, as a rule, a uniform rate of 0.30% is levied on the harmonised VAT base of each Member State. However, this VAT base is capped at 50% of GNI for each Member State. In addition, for the period 2007- 2013, 4 Member States have reduced VAT call rates: 0.225% for Austria, 0.15% for Germany and 0.10% for the Netherlands and Sweden. Some other corrections exist, in particular the UK rebate. The efficiency of VAT collection and control in the Member States may impact the amount of VAT own resources due by the Member State concerned as well as the relative share in total own resources of other Member States.
  3. Article 12 of Council Regulation 1553/894 on the definitive uniform arrangements for the collection of own resources accruing from VAT requires the Commission to submit a report to Parliament and Council every three years on the procedures applied in the Member States for registering taxable persons and determining and collecting VAT, as well as on the modalities and results of their VAT control systems. This report should enable Member States to assess risks and identify opportunities to improve VAT control and collection systems. Six reports have been made since 1989.
  4. The current report, building on the recommendations of previous reports and taking into account progress already made at EU and national level, aims at measuring improvements in VAT administration in Member States within the framework of Article 12 of the above mentioned Regulation. It takes into account recent developments in tax administration with increased emphasis on preventive measures and promoting voluntary compliance. It aims to identify good practices in the various steps of an effective tax collection, measured against common benchmarks.
  5. In order to prepare this report, a questionnaire on selected issues has been submitted to all Member States to pool the information needed for the report. The data submitted were discussed on several occasions with the Member States. Generally, the data included in the report reflect the situation up to 31 December 2011, unless otherwise indicated. Later developments are covered only if information was made available by a Member State.

Content

II. ANALYSIS
CHAPTER 1: Selected Issues on Organisation of Tax Administrations
CHAPTER 2: VAT Identification, Registration and Deregistration
Threshold and Stratification of VAT Registrations
VAT Registration Procedures
CHAPTER 3: Customs Procedure 42
CHAPTER 4: Submitting VAT Returns (Filing) and Payment
CHAPTER 5: VAT Collection and Recovery
CHAPTER 6: VAT Audit and Investigation
CHAPTER 7: Tax Dispute Resolution System
CHAPTER 8: VAT Compliance
RECOMMENDATIONS

Cutting Red Tape and Boosting Tax Revenues

In EU development, Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls on 26/02/2014 at 11:01 pm

Commissioner Šemeta welcomes European Parliament’s support for the Standard VAT Return

Algirdas Šemeta, EU Commissioner for Taxation, welcomed the European Parliament’s strong support today for a Standard VAT Return (see IP/13/988). The Standard VAT Return is one of the Commission’s key proposals to cut red-tape for business and improve tax compliance in the EU.

Commissioner Šemeta said:

“This proposal is about making life simpler and cheaper for businesses. With the Standard VAT Return, it will be as easy to declare VAT abroad as it is at home.

As such, it will remove a major tax obstacle in our Single Market and cut compliance costs by up to €15bn a year.

Moreover, simpler rules are easier to follow and enforce. So the Standard VAT Return should also boost tax compliance throughout the EU, bringing new revenues to the Member States.

I am very pleased – but not surprised – that the European Parliament has shown such backing for this growth-friendly, business-friendly proposal.

I would like to thank the rapporteur, Ivo Strejček, for his great work on this file.”

via Press release – Cutting Red Tape and Boosting Tax Revenues: Commissioner Šemeta welcomes European Parliament’s support for the Standard VAT Return.

Tax Fraud: Commission looks at how VAT collection and administrative cooperation can be improved

In Audit Defense, EU development, Processes and Controls on 13/02/2014 at 6:05 pm

Tax Fraud: Commission looks at how VAT collection and administrative cooperation can be improved

Today the Commission adopted two reports which shed more light on problems linked to fighting Value Added Tax (VAT) fraud within the EU, and which identify possible remedies.

The first report looks at VAT collection and control procedures across the Member States, within the context of EU own resources. It concludes that Member States need to modernise their VAT administrations in order to reduce the VAT Gap, which was around €193 billion in 2011. (see IP/13/844) Recommendations are addressed to individual Member States on where they could make improvements in their procedures.

The second report looks at how effectively administrative cooperation and other available tools are being used in order to combat VAT Fraud in the EU. It finds that more effort is needed to enhance cross border cooperation, and recommends solutions such as joint audits, administrative cooperation with third countries, more resources for enquiries and controls and automatic exchange of information amongst all Member States on VAT. Both reports are part of the broad Commission Action Plan to fight against tax fraud and evasion (see IP/12/1325), and can be found online on the European Commission’s Taxation and Customs Union website .

  1. Report I from the Commission to the Council and the European Parliament on the application of Council Regulation (EU) no 904/2010 concerning administrative cooperation and combating fraud in the field of value added tax
  2. Report II from the Commission to the Council and the European Parliament. Seventh report under Article 12 of Regulation (EEC, Euratom) n° 1553/89 on VAT collection and control procedures.

via EUROPA – PRESS RELEASES Daily News.

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