VAT Tax Evasion. Measures undertaken by the Portuguese Government. The Brussels Tax Forum th of November, 2013

Transcription

1 VAT Tax Evasion Measures undertaken by the Portuguese Government The Brussels Tax Forum th of November, 2013

2 Agenda European context Measures undertaken by the Portuguese Government to curb tax fraud and evasion Results of VAT monitoring database

3 European context

4 European context European efforts to fight tax fraud and evasion Action Plan Areas of Member-State cooperation Exchange of Information EU legal framework and instruments Global promotion of good governance Specific legal framework Financial support within the Fiscalis 2020 program Automatic exchange of information mechanisms EU wide electronic exchange of information formats Savings directive Agreements with Switzerland, Liechtenstein, Monaco, Andorra and San Marino Administrative cooperation on direct taxation (2015) Administrative cooperation on VAT (2012) Mutual assistance on tax collection Leadership regarding the promotion of international tax good governance International automatic exchange of information Assistance to developing countries Integration of EU information systems with other international systems. VAT quick reaction directives Commission action plan

5 European context European efforts to fight tax fraud and evasion Action Plan National recommendations Apply specific recommendations made to each Member- State Develop strategies with other Member-States to increase efforts against tax evasion What should be done at a national level Increase the scope of use of third party information Pre-filing of tax returns Efforts to reduce weight of shadow economy Apply Commission recommendations regarding tax havens

6 European context European efforts to fight tax fraud and evasion Study on alternative methods for improving collection of VAT VAT compliance issues VAT legal framework is being abusively used to allow situations of tax evasion and fraud Alternative methods of VAT collection Analysis of various assessment and control methods In depth analysis is made of 4 alternative models Green paper made by Commission COM issues a report (Dec2010) on the future of VAT All 4 methods have a positive cost-benefit ratio, although the cost of implementation of the methods varies

7 European context European efforts to fight tax fraud and evasion Study on alternative methods for improving collection of VAT Model 1 Split payment model 2 Central monitoring database model Description Bank splits the payment The taxable amount is paid to the supplier The VAT amount transferred directly to the tax authority Invoice data is sent in real time to a central VAT monitoring database. In favour Against Eliminates missing trader fraud Substantial changes in the way all businesses and tax administrations handle VAT Faster information; possible abolishment of VAT obligations More effective if e-invoicing is used for all B2B transactions. Costs of implementing system Data management Protection of confidential personal data.

8 European context European efforts to fight tax fraud and evasion Study on alternative methods for improving collection of VAT Model 3 Data warehouse model 4 Certified taxable person model Description Company uploads predefined transaction data into a secure VAT data warehouse Company maintains the database and accessible to the tax authority VAT compliance process and internal controls are certified. In favour This model allows quicker detection of missing trader fraud Increase trust between tax authorities and taxpayers. Against Does not prevent missing trader fraud; if the trader goes missing, VAT data warehouse disappears too Time-consuming Requires substantial investment by tax authorities in human resources.

9 Measures undertaken by the Portuguese Government to curb tax fraud and evasion

10 Measures undertaken by the Portuguese Government to curb tax fraud and evasion Implementation of Green paper - VAT measures Model 3 - Implementation of the Standard Auditing File system Measure OECD recommendation implemented in 2009 Computer file that allows the easy export of a predefined set of accounting records [SAF-T (PT)]. Scope Corporate income tax (CIT) taxpayers VAT taxpayers with turnovers above Objective Easier for taxpayers to provide their electronic records Easier for auditors to review accounting records. Advantages SAF-T provides tool to meet the requirements of other Government or Non-Government bodies Easier to switch from one accounting package to another

11 Measures undertaken by the Portuguese Government to curb tax fraud and evasion Implementation of Green paper - VAT measures Model 4 Certified Invoicing Software Measure All invoicing software be previously certified by the tax authorities Scope Corporate income tax (CIT) taxpayers VAT taxpayers with turnovers above Objective Information contained in the SAF-T file is accurate Reduce the risk of non registration of taxable transactions Advantages Standard for invoicing software with full integration with SAF-T Not time/resource consuming

12 Measures undertaken by the Portuguese Government to curb tax fraud and evasion Implementation of Green paper - VAT measures Model 2 Central VAT monitoring database Measure All taxpayers to communicate in real time (or via a monthly export from the SAF-T file) all invoices issued Scope All corporate income tax (CIT) taxpayers VAT taxpayers with turnover above send invoice information electronically (remaining have a simplified regime) Objective Tax authorities receive invoicing information as soon as possible, reducing risk of VAT fraud and evasion, namely through missing trader practices Advantages Reduces costs for taxpayers and tax authorities Certification of invoice software ensures compatibility Information filters avoids reception of personal/private information

13 Measures undertaken by the Portuguese Government to curb tax fraud and evasion Implementation of Green paper - VAT measures Two additional measures to improve Central VAT monitoring database effectiveness Mandatory invoices Tax benefit for requesting invoices Measure All VAT taxable transactions must be documented by an invoice, Invoice issued entitled to a 15% refund of VAT paid against PIT assessed in the following year (up to 250 per household). Scope All VAT taxpayers, regardless of turnover (some small exceptions apply) Incentive covers restaurants, hotels, car repairs and hairdressers. Objective Ensure that all transactions are properly invoiced Information is sent to the tax authorities Increase incentive of asking for an invoice in hard-to-tax sectors Advantages Change of cultural behavior Consumers can control businesses

14 Main results achieved

15 Main results achieved The VAT reform has been considered a success, due to the implementation of the central monitoring database model (1/2): The cost for the tax authority was lower than expected, The cost for taxpayers was limited, as the system uses already existing electronic standards The system has had an expressive positive impact on VAT revenue, especially in the hard to tax sectors covered by the tax incentive Detection of thousands of situations involving errors in tax returns regarding deductible VAT

16 Main results achieved The VAT reform has been considered a success, due to the implementation of the central monitoring database model (2/2): Over 3,1 Bi invoices sent to the tax authorities (360 M per month) - over 540 M invoices in the restaurant sector Total VAT assessed of more than 32 Bi Estimated 140% increase in VAT revenue from restaurant sector (250M to 600M ) between 2011 and % resulting from the implementation of the VAT reform and other set of measures Roughly 17 M in tax benefit given to ca. 2,5 M taxpayers companies invoiced and did not submitted the VAT form companies assessed less or deducted more VAT than due Overall, companies detected with irregularities - 40% of these companies voluntarily corrected their tax return.

17 Conclusions Innovative model in Europe to curb shadow economy Results above expectations in the first year of application Good acceptance by the business community and overall society Major changes in cultural behavior are already observable Effective communication and close cooperation with stakeholders is key

18 VAT Tax Evasion Measures undertaken by the Portuguese Government The Brussels Tax Forum th of November, 2013