Keynote speech by Marnix van Rij, State Secretary for Tax Affairs and the Tax Administration of the Netherlands
Tuesday 15 March, 15.45
‘Bridging the VAT Compliance Gap: Stepping up our efforts to reduce VAT losses’.
To mark Belgium’s presidency of the Benelux
Minister Van Peteghem, Vincent, Minister Backes, Yuriko, Secretary-General De Muyser, Alain, ladies and gentlemen,
Thank you for your inspiring words, Vincent and Yuriko.
The VAT gap has been, is, and always will be a problem. Hopefully I haven’t just dashed your hopes of what we could achieve today. I rather suspect not.
So we can never close the gap entirely. But we can make it as small as possible. By focusing more on bankruptcy and insolvency, fraud, avoidance and errors.
So I welcome the opportunity to talk about these issues today.
And I’d like to thank the Belgian Benelux presidency for organising this gathering.
In the Netherlands the gap is relatively low. But, in 2019 we still lost 2.7 billion euros in VAT revenue. That’s 4.4% of the potential annual VAT revenue. Revenue losses have been falling steadily in recent years, but there is still room for improvement.
The fact that the Netherlands’ VAT gap is relatively small is no coincidence.
Dutch businesses are generally conscientious about filing their returns. The Tax Administration works with the public and businesses to foster tax compliance. And not only when it comes to the collection of VAT, I should add.
We are mindful of the administrative burden on businesses and we keep each other informed. We also focus on prevention by providing effective guidance to businesses. So well-intentioned businesses tend to fulfil their obligations. As a result, the VAT gap in the Netherlands is relatively small.
Prevention, guidance and information sharing. We also use these three tools specifically in combating VAT fraud. In this way our tax authorities can act fast to avoid or limit VAT losses.
The VAT gap is caused in part by unintended errors, rather than fraud. Efforts to minimise these errors as much as possible, combined with the broad-based approach to increasing compliance, will help close the VAT gap.
Unfortunately, besides well-intentioned businesses, there are other operators that abuse the VAT system: the fraudsters. They account for around a quarter of the VAT gap. Here, a different approach is called for. An approach that can only be taken in partnership with the other member states of the European Union.
Allow me, if you will, to take you back to the end of the last century. I still remember the joy we felt when border controls were abolished in 1993. At most European border crossings you could now breeze through with no checks.
This paved the way for increased cooperation between tax authorities in Europe. We learned from each other and we worked more AND better together.
For example: in 2008/2009, Eurofisc started, a joint initiative of France and the Netherlands. Eurofisc is a network of officials across Europe working together to combat fraud. Extensive information exchanges between experts create an early warning system. This enables countries to detect suspicious patterns and networks, and raise the alarm. Eurofisc has been incredibly important, and still is.
And the icing on the cake is an analytical tool that we have developed here in the Benelux. Belgium in particular did a lot of the groundwork, for which we are still very grateful.
In 2016 this tool – Transaction Network Analysis or TNA – was embraced by all member states during the Dutch EU presidency. It was welcomed as a step forward in the fight against VAT fraud. TNA speeds up the collection of information, providing a clearer view of carousel fraud networks. TNA operates quickly, but it needs to be made even quicker. So quick, in fact, that it works at the same time a transaction takes place: what is known as ‘real-time reporting’.
A number of European countries already use real-time reporting. They each do so in their own way. That means businesses operating across Europe have to adapt to different systems. Which translates into a heavy administrative burden and hence high costs. There is agreement in Europe that this is not what we want.
The current method of real-time reporting has certain drawbacks. For example: data security. Or rather, a lack of data security. The way real-time reporting works now, a great deal of data is collected. And I wonder if we need all that data to further reduce the VAT gap.
I think we can take a different approach. In the Netherlands we are currently exploring the use of blockchain technology in accounting software to gather real-time information without collecting unnecessary data. This is important to us with a view to data security, efficiency and IT impact.
A proposal is expected from the European Commission in September this year, to harmonise the legislation regulating the use of real-time reporting in Europe.
In order to avoid a situation where we are all forced to retrieve and process all data, and all the negative consequences that would have, I see a role for us here in the Benelux. Let us play a pioneering role in Europe, just as we did in the development of TNA. The VAT gap will always remain, but let’s work together to make sure it is as small as possible.