New Technologies in VAT Reporting, Collection and Auditing: Legal Opportunities and Challenges (VATTECH)

• What are the technology-based tools for combating VAT fraud and what is the best practice (in the light of their purpose, the legal framework in the EU and the protection of taxpayers’ right)?
• What are the challenges to the taxpayers’ rights and the EU law and how can they be remedied?
• How could the EU VAT system benefit from technology-based tools and should  coordination/harmonization in that field be recommended?

1. Technology-based tax tools and their role in combating VAT fraud and supporting the functioning of the EU VAT.

MS have procedural and institutional autonomy as to the prevention of breach of VAT law, while being obliged to take all measures appropriate for ensuring collection of all the VAT due on their territory and must fight against tax evasion and tax fraud. Technology in VAT administration has been used by several EU MS as means of combating fraud and streamlining compliance by taxpayers. MS through their discretion or certain derogations granted under the Directive 112/2006/EC (VAT Directive) have in recent years introduced electronic reporting tools, real-time invoice clearance, split-payment mechanism and developed algorithm based data analysis and risk assessment tools to detect and prevent fraud. The first phase of VATTECH aims at setting out the central premises and scope of the project by focusing on identification and selection of relevant tools of VAT reporting, auditing and collection based on new technologies adopted in the recent years individually by states and clarifying their purpose and functionality.
This phase has analytically descriptive character and is of instrumental importance for phase 2 and 3. As the starting point, tentatively the list of tools to be researched includes SAF-T, real time VAT reporting and electronic invoicing, split-payment mechanism, as well as transaction network analysis tools, such as Polish “STIR”.
To clarify functionality of the tools and their role in combating VAT fraud a legal dogmatic methodology combined with comparative legal analysis will be used.

2. The challenges and opportunities of technology-based tax tools in the light of taxpayers’ rights and the existing EU legal order

Phase 2 will regard the central part of the project that is analysis of the selected tools and their underlying legislations. Legal dogmatic method will be also used to evaluate the tools in question from the perspective of their consistency with the legal character of VAT as general, indirect tax on consumption, the current legal framework as established by the VAT Directive and other relevant provisions of EU law. Integrity of the VAT system and EU legal order will be taken in consideration when formulating recommendations as to a preferred tools and legal guarantees concerning design, functioning and use of the tools by the MS.  The evaluation will also focus on the suitability of the researched tools as to their objective, and implications of their introduction for tax authorities and business alike. The core elements of effective tax administration consist of optimization of compliance in a cost-effective manner, minimizing burdens on taxpayers and building and maintaining the trust of taxpayers. Elements of empirical qualitative research will be relied on when analyzing functioning of the technology tax tools based on official documents published by institutions representing national business community and publicly available administrative decisions. The final evaluation allowing for identification of the opportunities and challenges will consist of assessment of the tools in the light of the principles of their suitability for combating VAT fraud and non-compliance on one hand, and the principle of legal certainty, fundamental rights, including the right to privacy, data protection and right to fair trial, which have been identified as potentially interfering with the technology based effective methods of combating VAT fraud. The ambition is also to consider how the identified challenges can be remedied, for example, through a restatement and redefinition of taxpayers’ rights and their enforcement in the context of new technologies.
A functionally comparative analysis of the tools used in different national jurisdictions is relevant considering that a common system of VAT based on to a large extent harmonized rules exist in the EU. The analysis is expected to enhance understanding of benefits and challenges relating to particular technological solutions. In that part the study is expected also to bring about a deeper understanding of how MS which have not introduced the modern tools of VAT collection, such as Denmark, could further improve their tax collection. To collect relevant national sources of law and scholarly articles, as well as to conduct the 2-3 short research trips will be planned to academic institution abroad. 

3. Potential coordination/harmonization of the tools at the level of the EU

Phase 3 will focus on the opportunities and challenges of a coordinated/ harmonized approach to the technology-based tools and their potential for enhancing administrative cooperation between the MS. In that context, it will be also considered whether and how technology could not only support the existing EU VAT system but also provide an opportunity for more far-reaching amendments to the system. Fragmentation of regulation in the EU significantly increases costs for businesses trading cross-border and distorts competition by creating incentives for businesses to establish in MS with less stringent compliance requirements or control.  Furthermore, the potential of the technology-based tools is not fully exploited due to geographical limitations of their application. A coordinated or harmonized approach could bring about simplification and greater certainty for taxpayers, could increase mutual trust by the MS and make fulfilment of their mutual obligation relating to tax collection more effective. On the other hand, harmonization entails challenges due to differences in constitutional laws of the MS, for example different scope of the principle of transparency and secrecy and privacy, and different legal cultures. The analysis in this phase will focus first on identifying the main weaknesses in the existing EU legal framework for VAT administrative cooperation. Secondly, building on conclusions from phase 1 and 2 and taking into consideration the principle of proportionality and subsidiarity, system recommendations will be formulated as to optimal rules on the level of the EU.

Past:

• 22.11.2023 – YIN (Young IFA Network) Mexico seminar (online): presentation on VAT in the Digital Age reform in the EU and the future of taxpayers’ rights.
• 16-17.11.2023 – a 1,5-day international tax law conference on “Fixing the EU VAT system with technology?: Towards a contemporary, fraud-proof and legitimate VAT in the Digital Age”.
  

• 15.11.2023 – post-Congress seminar (online), IFA (International Fiscal Association) Poland: Presentation and summary of the YIN Seminar “Consumption Taxes and the Digital Economy: Where Are We Now”.

• 22-26.10.2023 - 75th IFA (International Fiscal Association) Congress in Cancun, Mexico: Presentation at the Young IFA Seminar on “Consumption Taxes and the Digital Economy: Where Are We Now”; 
  

• 19-20.10.2023 – IVA (International VAT Association) Conference in Copenhagen, presentation on “VAT and AI Taxpayers’ Rights perspective”, Copenhagen;

• 10.10.2023 – Presentation “VAT, technology and human rights” at the University of Copenhagen for the University employees and external guests (Tax authorities and VAT specialists from business side) – presentation and discussion on the main results of VATECH project;
• 04.10.2023 – A seminar for VAT experts at the Danish Chamber of Commerce – presentation of the VAT in the Digital Age proposal of the European Commission;
• 19-23.06.2023 – THE 15th GREIT (Group for Research on European and International Taxation) Lisbon Summer Course: EU & International Tax Recent Developments, Speaker at the session on VAT;
• 16.05.2023 – teaching on “VAT reporting and E-invoicing in the EU” at the Advanced Master’s (LL.M.) in International Taxation at the University of Amsterdam;
• May 2023 and November/December 2022 – teaching on VAT and e-commerce at Tax and VAT law course, University of Copenhagen;

• 26-28.04.2023 -10th International VAT Conference at Lake Tegernsee (IVCC), Speaker at panel on “VAT in the Digital Age- Digital Reporting Requirements”;
• 25.04.2023 – A seminar on VAT in the Digital Age proposal by the European Commission at Dansk Skattevidenskabelig Forening (Danish branch of International Fiscal Association), “VAT in the Digital Age: Digital Reporting Requirements” (co-presenting with Kim Pedersen);
  
• 21.04.2023 – “Slice of my research” presentation in Pecha Kucha format at MOBILE and WELMA get together event. “Fixing the EU VAT system with technology?”
  
• 9.02.2023- Madrid VAT Forum 2023: Present and future challenges of EU VAT. Towards a digital VAT management?; Speaker: “The Use of New Technologies in VAT and Taxpayers’ Rights”;
• 31.10-2.11.2022 Nordic Conference on Law and Information Technology 2022, Copenhagen University; speaker presenting “ Tax, technology and human rights: problems and solutions for the EU value added tax law”;
  
• 28-30.09.2022 EFS Top-Level Seminar 2022. EU VAT: Recent Developments and Outlook; member of the panel on Real Time Reporting and e-invoicing and speaker: presentation on economic reality and the right of deduction
• 1-3.06.2022 9th International VAT Conference at Lake Tegernsee (IVCC), Speaker at panel on “VAT & Technology—A Blessing or a Curse? Will Technology Foster or Fragment the EU VAT System Further & What are the Current Drivers?
• 20.04.2022 – Tax Law Seminar Series at the University of Gothenburg: “Taxpayers’s Rights aspect of the new technologies in VAT – balancing the opportunities and challenges”, Commentator: Pernilla Rendahl
• 7-8. 04.2022. – GREIT Annual Conference, University of Amsterdam, “The Implications of Online Platforms and Technology on Taxation and Taxpayers’ Rights”: Speaker:  Panel 3: “Online Platforms and VAT Reporting”
• Ciclo de Conferencias (modalidad on-line) Inteligencia Artificial y Derecho Tributario (A cycle of conferences on Artificial Intelligence and Tax Law), University of Alicante, presentation on "New Technologies in VAT Reporting, Collection and Auditing: Legal Opportunities and Challenges”
• 14.03.2022 – 10.04.2022 Research stay: University of Alicante, Spain.
• 25.02.2022- Participation in an online workshop “Designing a unified electronic invoicing for the European Union. Part Three” organized by FAU Erlangen-Nürnberg together with the Osservatori Digital Innovation of the University Milan.
  

  

• <20-21 01.2022 – Conference “Court of Justice of the European Union: Recent VAT Case Law“,  Vienna University of Economics and Business: Keynote speaker: “The use of new technologies in VAT and taxpayer rights” (online)
• 15.12.2021 – VAT Congress 2021, Catholic University of Portugal, Member of panel 1: VAT & e-Commerce (online)
• 3.12. 2021 – WELMA Breakfast seminar, University of Copenhagen: Presentation of the research project with feedback
• 26.11. 2021 – Participation in an online workshop “Designing a unified electronic invoicing for the European Union. Part Two” organized byFAU Erlangen-Nürnberg together with the Osservatori Digital Innovation of the University Milan. 
• 28.10. 2021 -  Thøger Nielsen Konference om Skat og Fremtiden, University of Copenhagen: presentation ”VAT, technology and taxpayer’s rights”.
  
• 5.10.2021 – FIRE seminar, University of Copenhagen: presentation of the project

• “The end does not justify the means: On how the secondary EU law infringes the primary EU law in the light of the recent judgments of the CJEU”, INTERTAX, vol 51, Issue 8/9 (2023) (double blind peer-review)

• “MV - 98. Cumulation of administrative penalties of a criminal nature for the same act.” Highlights & Insights on European Taxation, Issue 9 (2023) (peer-reviewed)

• “Secure DRR to Tackle EU VAT Fraud” in Weber, D. “The Implications of Online Platforms and Technology on Taxation”,  International Bureau of Fiscal Documentation (IBFD) (2023)
• Papis-Almansa M. “VAT in the Digital Age. Real-time digital reporting based on e-invoicing for businesses”,  Highlights & Insights on European Taxation, Issue 2 (2023).
• Papis-Almansa, M., Lamensch, M. & Jafari, S. “European Union - Proposal for a Secure Digital Reporting Standard for Intra-Community Transactions”, International VAT Monitor vol 33, Issue 6 (2022)
• Papis-Almansa, M., “The use of new technologies in VAT and taxpayers’ rights” in  Kofler, G., Lang, M., Pistone, P., Rust, A., Schuch, J., Spies, K., Staringer, C. & Kuniga, I. (eds.). CJEU: Recent Developments in Value Added Tax 2021 (Linde 2022), Linde Verlag Wien, p. 1-32 (2022);  Pre-print available at SSRN