In 2018, the United Kingdom realized there was a big problem brewing inside the country – and it’s costing the government and the tax authority a lot of money. Electronic Sales Suppression is not something only the UK is facing, but it is something that not many countries decided to face head-on.
What Exactly Is ESS?
Electronic Sales Suppression is a method which businesses use as a way to manipulate their sales data, resulting in lower taxes. This mostly happens either during or right after a sale has been finalized and it involves manipulating a POS (Point of Sale) so it fails to register all the sales running through it. Doing this is not only illegal and can result in the most severe consequences, but it greatly damages the economy overall.
That is why in 2018, HMRC (Her Majesty’s Revenue and Customs) organized consultations with the most prolific experts within the industry. There was a wide group of stakeholders, businesses, tax professionals, consultants, and anyone with a wide knowledge of tax systems, participating.
The event mimicked a real-life situation where the organizers used a phone application to manipulate electronic sales – which means this app would delete the sales without a single trace. The participants had to find a solution to this burning problem.
Additionally, 13 crucial questions were asked on which participants had to offer a proper answer that would solve the issue:
1: Are you aware of ESS being used to evade taxes in the UK?
2: Are you able to make any estimates of the scale of ESS within your business sector or more generally? For example, are you able to estimate the proportion of businesses you believe may be participating in ESS or the value of sales not properly recorded?
3: Can you suggest any specific measures the government could consider to address ESS?
4: What do you see as the advantages of mandatory software or hardware for businesses which conforms to technical requirements that reduce the opportunity for ESS?
5: What do you see as the disadvantages of mandatory software or hardware for businesses which conforms to technical requirements that reduce the opportunity for ESS?
6: What do you see as the advantages of an encrypted, unalterable and complete transaction log containing details of every transaction and adjustment?
7: What do you see as the disadvantages of an encrypted, unalterable and complete transaction log containing details of every transaction and adjustment?
8: Would an unalterable transaction log be useful for wider business activities?
9: What other technological solutions could help tackle ESS?
10: What challenges should the government take into account in changing its approach to ESS?
11: Is there a role for the public in tackling ESS? If so, what could this role be?
12: How could HMRC and the EPOS industry work together to support businesses and reduce opportunities for tax evasion?
13: Please feel free to submit, alongside your return, any additional information that you feel would be useful to HMRC.
Data Tech International, having the proven experience in the prevention of tax fraud, has answered. We offered a lot of answers and a solution which were welcomed, heard, and very well received. If you’re interested to hear about DTI’s solution to this burning issue in the UK, please let us know by getting in touch with us through our e-mail – office@dti.rs.
The Outcome
On the 7th of July this year, the British Government vocalized the importance of all the participants and all the solutions they have offered. Once all the answers and solutions were summed up, there were two conclusions:
• Exploring technological measures such as mandatory software or hardware for businesses which conforms to technical requirements that reduce the opportunity for ESS.
• An encrypted, unalterable, and complete transaction log containing details of every transaction and adjustment.
Overall, the Government is fully aware of the damaging effect ESS has when it comes to fair market as well. Meaning that those who use ESS are taking advantage and are working directly against those who comply with the law.
For now, the British Government is planning to use the experience participants shared and develop an effective and permanent policy against ESS.