is a suite of applications designed
to handle the entire VAT
collection process from
beginning to end.
each transaction at the point it is traded.
The VAT payable is not deposited
into the merchant's bank account
but is immediately transferred to the
relevant tax authority.
extract taxes rather than leave the
payment of taxes to the voluntary
choice and morality of taxpayers. By
and large, taxpayers of all countries do
not want to pay taxes unless compelled
by a situation where they are left
with no option other than to pay the taxes.
efficient VAT system … MobiVAT
is shaping the future of VAT!On the
brink of a new VAT Revolution,
tomorrow sellers and buyers alike
do not have to even know about VAT.
United Kingdom £17,000,000,000
Current VAT Challenges
VAT has been in force for just a generation but has become one of the Government’s most important sources of tax.
VAT was originally a French idea, started in the 1950s. Many European countries enacted a VAT in the 1960s and 1970s. Developing countries followed in the 1980s and thereafter.
The way in which VAT is levied has hardly changed since the introduction of the tax: it still depends mainly on self-assessment by the taxpayer followed later by audits of the tax administration.
The VAT Gap, which is the difference between expected VAT revenues and VAT actually collected, provides an estimate of revenue loss due to tax fraud, tax evasion and tax avoidance, but also due to bankruptcies, financial insolvencies or miscalculations.
The challenge for the tax authorities is to come up with a solution that addresses the many causes of the VAT Gap, without placing undue pressure on businesses and taxpayers. One of the difficulties is that it’s notoriously difficult for the authorities to distinguish between a genuine oversight or mistake in a VAT return and an indication of a larger fraud.
The lack of adaptation to technological advances means that tax administrations are unable to use the technological advances that are widely available today. There is therefore a long gap between the events that constitute the tax on individual transactions and the moment when the tax administration identifies and reacts to the problems.
The main objective of the MOBIVAT split payment mechanism changes how VAT is generally collected by making the payment for the tax base (i.e., product price net of VAT) separate from that for the VAT amount. The net amount is paid to the supplier’s business bank account, and the VAT amount is paid directly to a dedicated bank account of the Tax Revenue Authority (TRA).
Deconstructing VAT System
There have been significant technological advances in the payment industry, which may facilitate different approaches to VAT collection and help reduce fraud. MobiVAT is therefore exploring alternative solutions for collecting VAT in real time through payment technology.
Within the context of an increasingly connected digital society, the introduction of Big Data technology combined with advanced analytics and increased digital presence creates an opportunity to deliver significant improvements in the way countries’ tax systems operate and connect. They also offer the opportunity to consider moving more to a real-time tax system and to explore new options for managing taxes, countering fraud, dealing with the shadow or hidden economy and assessing how assets are actually being used.
In order to rethink the VAT system, MobiVAT examine what is in place today. The current VAT model contains fundamental flaws and suffers from assumptions that are overly broad and ultimately unnecessary. A series of patches and band-aids have been billed as best practices and part of an in-depth compliance strategy. And although these compliance practices are helpful in protecting tax revenues in a generic sense, they do not focus on the real issues of our tax collection systems.
But in the era of globalization, market development and social media marketing, the world is much more interconnected and interdependent.
As a result, a new generation of software platforms has appeared – marketplaces, which not just aggregate merchants but also serve as platforms for the interaction between merchants and customers.
Because of this interaction, new players in the transaction processing arena have emerged and the process of settling payment obligations has become much more complicated.
Rethinking VAT Collection Model
There is a need to be forward looking and focused on how tax collection performance can be better in the future.Use of MOBIVAT Suite of Software could represent a potentially important tax administration initiative, aimed at improving VAT compliance by transmitting transaction records directly to the Tax Revenue Authority in real time.
The basis of the MobiSplit VatGateway system is the transition to the real-time collection of VAT, including the settlement of eligible claims based on the moment of actual payment by the buyer to the seller of goods and services.
The VAT element is separate from the buyer’s payment and is separated (delivered electronically to the tax office from the buyers’ bank account, the VAT never reaches the merchant’s account).
Rather than require sellers to collect and remit VAT, the MobiSplit VatGateway would use electronic payments to automatically remove the VAT component from a buyer’s payment and remit that amount to the tax authority in real time.
Using MobiSplit VatGateway Real-Time collection, fraud can be greatly reduced, administrative costs slashed and revenues collected with much greater efficiency.Technology can be used to change the collection of tax so that systemic losses and openings for fraudsters are minimised.
MobiVAT recommend the removal of VAT registration threshold for ALL business. That in essence is a good thing, however, this is subject to the market being fairly regulated and enforced in an equitable manner and we should all expect to operate within a fair competitive environment in which fiscal and regulatory compliance is equitably applied, and enforced.
Towards a simpler, more robust and efficient VAT system … MobiVAT is shaping the future of VAT! On the brink of a new VAT Revolution, tomorrow sellers and buyers alike do not have to even know about VAT.
Every Tax Administration throughout the world collects taxes from its taxpayers in order to garner resources for the government’s public expenditure. Recovery of taxes is one of the most important functions of tax administrations, to a large extent the sine qua non for efficiency and efficacy of the tax administration.
Tax revenue generation presents a daunting challenge to governments of all countries and this problem has been a long standing one! Creating a sustainable administrative revenue system that can administer own source revenues in an easy, efficient and cost effective manner is a goal that many national and sub-national governments around the world share.
To address these challenges and with recent advances in information and communication technology (ICT), there has been a strong drive to use ICT to increase the efficient collection of tax revenues.
One way to improve efficiency in digital tax and revenue collection is to make the online process easier for the taxpayer.
The use of MOBIVAT presents many benefits for Tax revenue authorities, including faster processing of information and data, requiring fewer resources and reducing the cost of collection. It also increases transparency and is therefore a powerful tool in tackling corruption and reducing the opportunities for fraud.