VAT article

New Approach to VAT Could Mean Billions for Dutch Government

Jens Hartkoorn
Tax Accountant

If we compare the VAT approach of the Dutch government with the VAT approach of Italy and Spain, there is a lot to be gained in the Netherlands. While both Italy and Spain are not known for their efficient fiscal systems, they are ahead of the pack when it comes to their VAT policies.

In Italy and Spain, there are systems in place that allow the Tax Authority to view invoices faster. The VAT reports that companies have to submit in both companies are much more elaborate. Because of this, it is harder to defraud the Tax Authority by redeeming VAT without paying VAT.

2 Billion Euros

There is a theoretical and an actual VAT yield and the difference between those two is called the VAT gap. The VAT gap is the difference between the VAT that is paid and the VAT that should have been paid. In the European Union, this gap is 137 billion euros. Only 89% of VAT is actually paid. It is estimated that a third of that, 34 billion, is VAT-related fraud.

Closing the Gap

By upgrading their software systems and implementing a new approach with new rules and regulations for reporting VAT the Tax Authorities in Italy and Spain have been able to lower their respective VAT gaps with 25% and 40%. If the Dutch Tax Authority would follow this same road the extra VAT paid would be between 1.5 and 2.3 billion euros.

Digitalization and IT Systems Are Key

The Dutch Tax Authority is struggling with its IT infrastructure. It is a few steps behind when it comes to digitalization and big investments are needed to bring its systems up to speed again. That may be one of the reasons there is a focus on fraud detecting, instead of fraud prevention which warrants an upgrade of IT systems.

Focus on Digitalization and IT

At Customs Support digitalization and IT are at the core of our business. Digitalization enables highly efficient processes and reduces potential errors, for example in processes that have a lot of manual data entry. It also enables our specialists to focus on tasks that add value for our customers, instead of tedious tasks that can be automated.