However, it failed to comply with an important requirement regarding pricing – the EU countries mandate that the total price, advertised to customers, must include VAT, that adheres also to Twitter. In the US, taxes the practice is to add them to the displayed price only at the checkout, which might be the reason for the mistake.

The problem about monitoring transactions to ensure a proper tax collection

On a larger scale, monitoring transactions and collecting taxes with international services is an issue tax authorities face around the world. Efforts to “domesticate” the revenue from cross-border sales (which have become so prominent over the past couple of years due to the rise of social platforms and streaming services) have proven to be both a technological and legislative challenge.

One reasonable solution was proposed by Professor Ainsworth who says that currently available technological solutions, such as TaxCore®, could enable tax authorities to simply extend their regulations “to all nonresident suppliers (including suppliers of remote services)” – an approach he calls “fighting technology with technology” (Data First, Tax Next: How Fiji’s Technology Can Improve New Zealand’s ‘Netflix Tax’, Tax Notes, Volume 94, Number 2, April 8, 2019).

TaxCore® solution even enables the customers to perform a real-time receipt verification after the purchase. The verification allows them to also review all relevant receipt details, including a price specification of all charged items. Awareness of such powerful tools in the hands of both customers and tax authorities would make companies like Twitter think twice about how they communicate their prices and VAT collection.

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In the EU and the USA, countries are still losing millions in tax revenue because they haven’t perfected their tax-collecting systems just yet. However, both of these unions are facing different problems. The USA is losing millions due to VAT (or the lack of it), and the EU is losing a significant amount of revenue with the Tax Recovery System.

What Is the Tax Recovery System?

Tax Recovery is a system that the members of the European Union use to properly track taxpayers who didn’t pay for their taxes and decided to move away. There have been a lot of cases of citizens escaping from one European country to another only to avoid paying for their taxes. Naturally, this harms the economy and the EU had to find a way to stop it.

Thanks to this system, one Member State can hold you liable for the taxes you avoided even if you live in another state. This can even go to the point where they can seize your salary or even automatically deduct a certain amount of your paycheck until you have paid your taxes in full.

Naturally, a taxpayer will always be notified in time about the taxes they didn’t pay. For this scenario, EU prepared the “Uniform Notification Form,” which the EU uses when a tax authority of the taxpayer’s state of birth demands that you pay for your taxes from a different state. The form provides all the documentation and proof that one has not abided by the law and must pay their taxes as soon as possible.

Naturally, you can obtain the form in your own native language; or any other recognized language of the EU.

In case a taxpayer still denies fulfilling their civic duties, the Member State can take recovery actions. They can do this by using the so-called “Uniform instrument permitting enforcement in the requested Member State.” This significant document allows for enforcement in the state where the tax is due. Either way, establishing proper communication between member states of the EU is crucial, because the number of people trying to avoid taxes by disappearing is constantly increasing.

What Can TaxCore Do?

The Tax Recovery system does its job, to an extent. It is, unfortunately, still quite bureaucratic. And in the 21^st century, any space for mistakes should be minimal – and lengthy paperwork should not be an issue anymore.

Because of bureaucracy, many countries worldwide are suffering from loss in tax revenue. This is where digitalization can help; it can make things run faster and more transparent.

TaxCore offers a solution where every taxpayer is registered into the system and each payment can be thoroughly tracked. The established server of the tax office constantly receives real-time feed from taxpayers and is aware if any of them are trying to dodge taxes or any VAT costs.

In the case of Tax Recovery system, this can only be useful and speed up the slow procedures. As a platform, TaxCore is very adaptable and formidable, which means a certain country can build up a whole system around it. The point of the platform is to help tax authorities motivate their taxpayers and punish accordingly those who avoid taxes.

Every taxpayer is registered with TaxCore, should this taxpayer own a business, it will have its own digital signature so the tax office can easily track their receipt issuing. If they notice receipts are not being issued for a certain period, they can quickly react. Our proof of audit technology will also stop a business from issuing receipts in case if it cannot verify all of them and notices a few are missing.

By using technology to our advantage, we managed to create a system where transparency leaves absolutely no space for maneuvering. For these reasons, both developing and developed economies can use TaxCore to their advantage and increase their tax revenue significantly.

The post EU’s Tax Recovery System and How TaxCore Can Help appeared first on Dti.