In this article, we explore in greater detail some of the current trends on approaches to managing VAT compliance.
In a Tax Watch article in April 2016 entitled “Indirect Tax Data & Systems Quality – the new audit battleground”, we flagged that the quality of tax data produced by business information systems will become a key focus area of audits by tax authorities in the future. This is in the context of tax authorities using increasingly sophisticated data analytic tools and imposing additional reporting requirements to monitor VAT compliance. Since then, a number of countries have introduced additional system-driven VAT compliance requirements and real time reporting of VAT data. This potentially sets out a road map that countries such as Ireland, the UK and others may potentially follow in the short to medium term.
In this article, we explore in greater detail some of the current trends on approaches to managing VAT compliance. We look at how tax authorities are increasingly using technology to move from a “look back” approach to VAT compliance to “real time” reporting and review and the challenges this can pose for businesses. We also highlight some potential approaches and steps that can be taken to efficiently manage the challenges posed by these developing standards.
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