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966 billion reasons for split paymentVAT

 

If we want avoid a clear fall in living standards and financing capability of welfare services in EU - we need better productivity and just collection of lower taxes. The split payment VAT is an ideal model for both purposes.

 

From EU document:

 

"28. The benefits of the model are great, as the tax authority can be sure that it will receive all the VAT collected on B2B transactions. This benefit will, however, only be realised to its fullest extent, if the model is made mandatory, the chargeable event is for all supplies always at the time of payment and a large number of B2B transactions are settled using electronic funds transfer (EFT). It is currently unknown how many B2B payments are settled using EFT versus in cash or with credit or debit cards. If additional research shows that a large number of transactions are paid using credit or debit cards, or even cash, the benefits will dwindle and additional evasion could arise by businesses that start using alternative payment channels instead of EFT.

 

29. The model requires a high initial investment and a longer implementation phase as banks will have to adapt their payment facilities, such as online banking programs. According to the implementation time frame the timing of the costs and benefits will differ. Under a big bang scenario the implementation could be complete in the year 2020. The impact of this model is comparable to the implementation of the SEPA regulation throughout Europe.

 

30. In this model there is a limited direct investment required by the taxable person. There is however a considerable operational costs as the taxable person needs to manage this additional blocked VAT bank account. Apart from investments by taxable persons’ banks plus the additional clearing costs that will arise for each payment, the model also requires a large investment programme by the tax authorities’ banks, which will be in charge of managing the blocked VAT accounts, and by the tax authorities themselves, who will have to monitor each taxable person’s VAT current account and (possibly) generate pre-filled VAT returns.

 

31. The costs of these kinds of applications will vary from Member State to Member State as the requirements will depend on the maturity of existing technology, the required level of integration with other legacy systems and the level of decentralisation of the tax authority in question.

 

32. We calculated the NPV in 2015 (before the first year of investment) of the costs and benefits in each scenario for the entire time frame 2016-2038. Under the big bang scenario the minimal NPV of the split payment model, in terms of the expected VAT Gap reduction minus the estimated investment and operational costs is estimated to be EUR 966 billion."

Earlier: The Future of VAT - real time and automatic http://www.finextra.com/community/Fullblog.aspx?id=4214

 

 

http://ec.europa.eu/taxation_customs/resources/documents/common/consultations/tax/future_vat/vat-study_summ_en.pdf

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Bo Harald

Bo Harald

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Transmeri, Demos, Real Time Economy Program,MyData

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