Blockchain (Distributed Ledger Technology) Solves VAT Fraud by Richard T. Ainsworth and Andrew Shact
Blockchain is a revolutionary improvement on any centralized data system. Tax administrations are inherently based upon centralized repositories of taxpayer data. They are prime candidates for the kinds of efficiency improvements that come through blockchain. This is particularly the case for transaction taxes, and even more so for a VAT fraud prevention application, like the Digital Invoice Customs Exchange (DICE), which relies on a real-time exchange of encrypted data.
This first edition provides practical guidance to assist government officials and financial institutions in the implementation of the global Standard for Automatic Exchange of Financial Account Informaion in Tax Matters. The Handbook is intended to be a “living” document and will be updated on a regular basis.
Electronic Fiscal Devices (EFD) study of the impact on taxpayer compliance and administrative efficiency by Peter Casey and Patricio Castro
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.
The introduction of EFDs typically requires considerable effort and has costs both for the administration and for the taxpayers that are affected by the requirements of the new rules. Despite their widespread use, and their considerable cost, EFDs can only be effective if they are a part of a comprehensive compliance improvement strategy that clearly identifies risks for the different segments of taxpayers and envisages measures to mitigate these risks.
DICE – Digital Invoice Customs Exchange by Richard Thompson Ainsworth and Goran Todorov
A digital invoice customs exchange (DICE) is a technology-intensive tax compliance regimen for VAT/GST that utilizes invoice encryption to safeguard transactional data exchanged between seller and buyer in both domestic and import/export contexts while simultaneously notifying concerned jurisdictions of the transaction details.
VAT — East African Community: The Tradable Services Problem World-Class Solution by Richard Thompson Ainsworth and Goran Todorov
This paper will show how fraudsters use tradable services to steal VAT receipts intended for the government. It will explain how the Reverse VAT (common in residence-based VAT/GST systems) attempts to block this fraud, and then demonstrates how data security measures (digital invoices) when coupled with a real-time remote audits (made possible with customs exchanges) will identify and largely eliminate B2B frauds in cross-border trades and most importantly tradable services.
The Fiscal Till and Other Novel Ways to Prevent Tax Evasion: Any Relevance for Improving Tax Compliance in New Zealand? by Andrew M C Smith and Neil J Walsh-Smith
This paper explores the issue of whether the measures enacted in Europe and North America would be effective in New Zealand to reduce tax evasion in the small business sector. The experience of these European and North American countries will be examined as well as the compliance model and strategy adopted by the New Zealand Inland Revenue Department.
Electronic sales suppression: A Threat to Tax Revenues by OECD
“Electronic sales suppression” techniques facilitate tax evasion and result in massive tax loss globally. Point of sales systems (POS) in the retail sector are a key component in comprehensive sales and accounting systems and are relied on as effective business accounting tools for managing the enterprise. Consequently, they are expected to contain the original data which tax auditors can inspect.
An American Look at Zappers by Richard Thompson Ainsworth
The common observation in the U.S. is that enforcement against technology-facilitated sales suppression has fallen through an intra-jurisdictional crack. Neither federal nor state auditors systemically target this area. But this is changing, and the change is coming from the state side.
This paper has two main parts. First, it summarizes the current state of sales suppression enforcement in the U.S. Secondly, it reviews the international solutions that are attracting the most U.S. attention. A conclusion indicates likely directions for U.S. enforcement.
Stopping MTIC — With a 3rd Invoicing Directive by Richard Thompson Ainswoth
This paper “connects the dots.” It considers Brazil’s successful digital invoicing regime in the Sistema Publico de Escrituracao Digital or Public System for Digital Accounting (SPED) and applies what has been learned to the pattern of MTIC and missing trader extra-community (MTEC) frauds in the EU. A follow-up paper will align the Croatian Fiskalizacija – IT (Fiscalization program) with the Brazilian SPED, and then consider the data security and remote audit functionality of the newly implemented Rwandan system.
Zappers – Retail VAT Fraud by Richard Thompson Ainsworth
Zappers skim cash sales at retail. Zappers are add-on programs used by merchants with electronic cash registers (ECRs) or point-of-sale (POS) systems. Zappers are smart and selective. They do not skim all sales, and they never skim credit card transactions.
Quebec’s Sales Recording Module (SRM): Fighting the Zapper, Phantomware, and Tax Fraud with Technology by Richard Thompson Ainsworth
This article considers the SRM in a comparative context. The technological approaches of Germany and Greece (both of which are fiscal till jurisdictions) are contrasted with the approach adopted in the Netherlands (a principles-based jurisdiction), which relies on intensive technology-based audits to assure digital record accuracy.
Massachusetts Zappers – Collecting the Sales Tax that Has Already Been Paid by Richard Thompson Ainsworth
No other New England state is as vulnerable to Zappers as is the State of Massachusetts. Zappers and related software programming, Phantom-ware, facilitate an old tax fraud – skimming cash receipts. In this instance skimming is performed with modern electronic cash registers (ECRs).
Tax Fraud in the Sales Tax: Zappers — What are They? How Can Puerto Rico Block Them? by Richard Thompson Ainsworth
This paper generally proposes that Puerto Rico look to technology for improvements. It suggests that Puerto Rico consider adopting one or more of the software certification efforts underway globally to boost revenue results. The specific focus of this paper is on stopping cash skimming frauds (the use of Zappers), but it is important to see this as part of a wider movement to utilize certified technology to improve compliance and enhance revenue.
California Zappers: A Proposal for the Commission for the 21st Century Economy by Richard Thompson Ainsworth
California has not uncovered a single instance of technology-assisted cash skimming – there are no zappers, and no phantomware in California. Is this because Californians are not skimming cash sales with technology, or is this because the California technology works so well that the fraud cannot be detected?
Electronic Tax Fraud – Are There ‘Sales Zappers’ in Japan? by Richard Thompson Ainsworth
Although there is no public acknowledgement – in the press, in a court case, though any announcement by the Japanese National Tax Administration, or in any academic studies or papers – that Zappers and Phantom-ware are a fraud problem in Japan, a number of factors suggest that Japan may be very fertile ground for technology-assisted cash skimming fraud. Those factors include: (1) a high concentration of small to medium sized businesses; (2) the fact that the retail economy is highly cash-based; and (3) the high level of technology acceptance in the Japanese retail sector – electronic cash registers (ECRs) and point of sale (POS) networks are commonly employed in the retail trade.
VAT Fraud and Evasion: What Do We Know, and What Can be Done? by Michael Keen and Stephen Smith
This paper describes the main forms of noncompliance distinctive to a VAT, considers how they can be addressed, and assesses evidence on their extent in high-income countries.