The European Commission has made a call for tenders on the feasibility of new methods for collecting VAT through modern technologies

The European Commission has made a call for tenders on the feasibility of new methods for collecting VAT through modern technologies or via financial intermediaries

Full details of the envisaged study can be found at http://ted.europa.eu/Exec;jsessionid=CBD634F203A889DFDBD2F40B32792990.instance_1?DataFlow=N_one_doc_access.dfl&Template=TED/N_one_result_detail_curr.htm&docnumber=239610-2009&docId=239610-2009&StatLang=EN

The Commission has identified the need for a coordinated strategy to improve the fight against VAT fraud in the EU and its intention to launch a reflection on a longer term perspective about the management of the VAT system and in particular about the ways in which businesses and tax administrations communicate with each other.

The Commission expects to have the results of this study in 2010 when it will look at the options for modernising the VAT system.

European Commission focuses on real time VAT collection

On the strength of a submission from RTvat to the High Level Group of Independent Stakeholder on Administrative Burdens (also known as the Stoiber Group), the Commission has recognised the role of that the introduction of a real time VAT collection could have in reducing the high administrative burdens that blight the existing EU VAT system.

On 22 October last in a Communication from the Commission to the European Parliament and the Council entitled "Action Programme for Reducing Administrative Burdens in the EU", a real time VAT system is listed for consideration by the incoming Commission in 2010. The full report is available at http://ec.europa.eu/enterprise/policies/better-regulation/files/com_2009_544_main_fr.pdf.

The findings on real time VAT can be found in the Annex, setting out recommendations on page 88 under point 11 – "sectoral reduction plan for taxation".

This is a welcome recognition for the RTvat model.

Serious losses in VAT confirmed at over €100 billion per year

The European Commission has engaged Reckon LLP, the London based economic consultancy group, to assess the revenue lost through shortcomings in the EU's VAT system.

The Commission has now published this report and the full text is available at http://ec.europa.eu/taxation_customs/resources/documents/taxation/tax_cooperation/combating_tax_fraud/reckon_report_sep2009.pdf .

The findings cover 24 Member States (Cyprus, Bulgaria and Romania are not included) and conclude firm that the total VAT gap for these countries for 2006 was €107 billion or 12% of receipts.

This shortfall is a consequence of fraud in the system, tax unpaid because of trader insolvency but also includes the cost to tax administrations of legitimate tax avoidance measures. Although confirming the seriousness of the shortfall, the report does not seek to break it down over these different headings.

The full report should be read by anybody who is worried about the waste of public resources outlined here. It can only be hoped that the figures here become a wake-up call for politicians.

VAT Carousel Fraud issues highlighted in the EU Emissions Trading Scheme

Progress within the EU institutions has been slowed by the recent European Parliament elections and by the uncertainty within the Commission due to the failure of Ireland to ratify the Lisbon Agreement. It now appears that the current Commission will continue in a 'caretaker' mode for at least the rest of 2009.

In the meantime, a number of financial irregularities have been noted within the European Emissions Trading Scheme; a suspicion of widespread Missing Trader Fraud on the trades of carbon allowances was recently identified in France, the UK and the Netherlands, as a result of which each of those Member States has taken unilateral action to attempt to stem the fraud. It is widely expected that the Commission will propose a modified Reverse Charge system as an interim measure across all Member States.

RTvat has been in active discussion with the relevant departments within the Commission and other interested stakeholders, proposing that a real-time system applied to this specific area could both eliminate the fraud in very simple and immediate fashion and act as a pilot for a wider application of the technology.

25th June working breakfast: ‘Improving the EU VAT system and cutting the costs for SMEs’

Hosted in the EU Parliament by The SME Union of the EPP

A well attended event moderated by Zsolt Becsey MEP, with speakers Chris Williams (RTvat), Stephen Bill (Head of Cabinet of Commissioner Kovacs), Professor Alain Steichen (University of Luxemburg), and Gerhard Huemer (UEAPME). RTvat presented the RTvat system as a single solution for reducing VAT fraud and VAT-based administrative costs, outlining how small yet powerful changes to the current VAT system can bring highly impactful benefits to SMEs.

Stephen Bill commented “This is a wonderful idea” and said that he saw technology as the ultimate solution to VAT fraud. His concern over the amount of time required to implement the changes required was responded to by Professor Steichen, whose presentation showed how much of the current system will remain the same and how only small changes need to be made to implement the RTvat solution, and by Stephen Coleclough of PWC, who offered the example of legislation in the field of overseas telecoms providers which was agreed and passed within six months.

Concerns expressed about whether banks would agree to be involved were answered by Chris Williams who said that the feedback from banks approached about the RTvat solution was positive and enthusiastic. This comment was supported by Mr. Becsey, who outlined the positive aspects for banks. Other comments about general fraud served to emphasise the specific VAT focus of the RTvat solution. Mr Huemer positively endorsed the focus of the RTvat solution in reducing fraud. Mr Becsey concluded the meeting with a strong endorsement of the transparency of the solution, indicating that the RTvat system will work for SMEs rather than against them and adding his personal support for the RTvat solution.

17th June one-day seminar: ‘Real-Time VAT’

Hosted at Business Europe Brussels by Business Europe VAT Group

A lively and in-depth one day analytical discussion of the RTvat solution by corporate tax experts. Topics ranged from current business VAT registration problems, insider dealing, real-time currency exchange and general fraud to exemptions (such as vouchers and gold bullion), import and export, the black economy, and intra-company cross-border trade. RTvat brought two technology experts from the USA to the meeting to discuss the issues of technical interfacing with corporate accounting procedures.

The attendees were keen to explore every avenue of the RTvat solution, providing insight and information on the corporate-specific concerns and range of VAT scenarios. RTvat was very pleased at the level of enthusiasm behind this analysis, and delighted to see the RTvat solution being developed with stakeholders to provide the best solution for all parties involved. Business representatives also expressed their opinions over the likely response to the solution from governments and tax authorities, which RTvat will be following up for confirmation.

The outcome of the meeting was the conclusion that the RTvat solution would have a positive impact on missing trader fraud, on identification issues and on input VAT fraud, all of which were clearly major concerns for the attendees.

ECOFIN Finance ministers suspend VAT fraud talks until May

CNN is reporting from the ECOFIN meeting held on 4th March that EU finance ministers have suspended their talks on fighting VAT fraud until their May meeting at the earliest.

At a cost of €275 million per day, that will be another € 20 billion lost before they even discuss it again. The RTvat solution could be put in place quickly to stop these losses - all it takes is the political will.

For the full report, see www.cnbc.com/id/23465084