The Big Four auditors emphasize in their Indirect Tax Surveys the increasing risks of assessments, fines, and reputational damage, as the importance of indirect tax amounts flowing through the accounts is increasing, and the KPIs and effective monitoring missing for indirect tax.
The European Commission mentioned in September 2015 that the total VAT-gap amounts to €168 billion. The prevention of VAT fraud is a high priority list of the European Commission. From its action plan we have selected a couple of actions:
- Improvement of collaboration between EU and non-EU countries;
- Enhancement of effectiveness of the tax services, including research into the possibility for automated data provision that enables the tax authorities to develop a computerized mechanism to trace and connect individual transactions, to signal fraud at an early stage;
- Development of a new way of data collection by collaborating with the EU countries
- Improvement of collaboration between authorities and setup of a joint procedure for detecting and handling fraud.
The tax authorities not only want to receive more tax data but also faster and more often.
Also, there is a tendency to allocate the ultimate tax responsibility at the highest level in a company. Since last year in the United Kingdom, the Board of Directors has to sign off the company's tax strategy and also publish the tax strategy externally.
The new data requirements of the tax authorities have to be adequately assessed and interpreted from a tax risk management perspective to see whether the data requested contain any unforeseen and significant tax risks. The outcome of such an exercise could also make clear that the company has to reorganize its business and tax processes.
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KG 'strategic alliance' brochure
The next SAF-T wave
The following countries might be in the next wave: Germany, UK, Ireland and the Czech Republic. The Netherlands and Belgium are experimenting with another electronic format called “Transaction Network Analysis”, TNA is an overall European Commission initiative and 8 other countries have already joined.
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Written by Richard Cornelisse
Richard advises multinational businesses in improving the efficiency and effectiveness of their Indirect Tax Function and Tax Control Framework.
He started his career as a manager at Arthur Andersen and then became an EY partner where he led the indirect tax performance team for Netherlands and Belgium. Currently, he is a managing director of SAP Tax Consultancy Firm.
Richard has over 20 years of experience advising clients on international VAT issues. He is specialized in the tax aspects of financial transformations, shared service center migration, and post-merger integration work.