We all know that today’s VAT reporting and payment process is mildly speaking cumbersome for 24 million enterprises in EU – eating into their global competitiveness. We also know that it is a very costly operation for the tax authorities (waste of tax payers’ money) and that it is leaking badly and seems to be an open innovation for fraud (100 billions lost every year according to EU study).
The future of VAT can and must be quite different. As the migration to the also otherwise so-sense-making e-invoicing is progressing fast it is possible to deploy SPLIT-payments – meaning that when the buyer is paying the invoice the VAT-part will be directed to tax, the net amount to the seller (automatically followed by possible refund). Easy as that.
How big a part will this be in the “Cutting enterprise administrative costs in half” program? How much less tax planning? How big will the savings be in the public sector? How much more tax can be justly collected – other taxes lowered? How much less crime?
Substantial must be an understatement. Think of it. In the enterprise today: massive work in collecting, adding up, remembering, paying, paying too early > reclaim, paying too late > penalties, VAT auditing etc etc. Tomorrow: sellers and buyers alike do not have to even know about VAT – it is all automated in the payment process.
There must be very good reasons for not having this as a top priority already now.