New technologies in VAT reporting, collection and auditing: legal opportunities and challenges”

Project Information

VATTECH

Grant agreement ID: 101028296

DOI

10.3030/101028296

Project closed

EC signature date 23 April 2021

Start date 1 October 2021

End date 24 December 2023

Funded under

• EXCELLENT SCIENCE - Marie Skłodowska-Curie Actions

Total cost

€ 219 312,00

EU contribution

€ 219 312,00

Coordinated by

KOBENHAVNS UNIVERSITET
Denmark

Periodic Reporting for period 1 - VATTECH (New technologies in VAT reporting, collection and auditing: legal opportunities and challenges”)

Reporting period: 2021-10-01 to 2023-09-30

Summary of the context and overall objectives of the project

This project investigates the legal opportunities and challenges of the use of technology-based tools in VAT administration as means for combating VAT fraud, facilitating compliance and supporting the proper functioning of the harmonised EU VAT.
The advancement of new technologies – including big data analysis and complex algorithms – has the potential to significantly reducing VAT fraud and facilitating a proper functioning of the EU VAT system. Fraud erodes budgets of states and leads to distortions of competition. It affects honest businesses and consumers and violates the very fundaments of the EU Internal Market.
On the other hand, technology-based tools and their use by public administrations cause risks of infringement of taxpayers’ rights including the right to fair trial, the right to privacy and the right to property. The objective of VATTECH is to evaluate technology-based tools in the light of the EU legal framework and the protection of taxpayers’ rights. The ambition is to provide important, new insights into the EU VAT system and to contribute to the improvement of the tools to combat VAT fraud, administrative cooperation and exchange of information between and across the EU MS.
The main questions addressed in the framework of VATTECH are:

1. What are the technology-based tools for combating VAT fraud and what is the best practice (in the light of their purpose, the legal framework in the EU and the protection of taxpayers’ right)?
2. What are the challenges to the taxpayers’ rights and the EU law and how can they be remedied?
3. How could the EU VAT system benefit from technology-based tools and should coordination/harmonization in that field be recommended?

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

VATTECH resulted in a number of research outputs consisting of six, peer-reviewed, open access publications and extensive engagement in debate on the central issues of the project with different stakeholders. VATTECH has been presented and at 19 academic conferences and seminars in Europe and beyond. The research questions of VATTECH inspired and were discussed during an international tax law conference “Fixing the EU VAT system with technology?: Towards a contemporary, fraud-proof and legitimate VAT in the Digital Age” which I organized at the University of Copenhagen. VATTECH's findings have been also incorporated in teaching at master and post-master level at tax law courses in Europe. I engaged in a dialog with business representatives, including the Danish Chamber of Commerce and tax administration through organization of workshops for these stakeholders. VATTECH has had an impact through my engagement in policy work as a member of the VAT Expert Group at the European Commission, where I could base my contribution on my VATTECH research. The insights from VATTECH have been also served as an input to a workshop “Designing a unified electronic invoicing for the European Union.” The core part of VATTECH has been the issue of the compatibility of the technology based tax tools used and planned to be used in combat against VAT fraud with the established legal framework in the EU law and in particular human rights (WP2). Issues and challenges have been identified and analysed in paper “The use of new technologies in VAT and taxpayers’ rights”. The follow up paper “The end does not justify the means: On how the secondary EU law infringes the primary EU law in the light of the recent judgments of the CJEU” elaborated on the most recent conclusions by the CJEU as to when the national and even secondary Union law infringes the Charter of the Fundamental Rights of the European Union. These findings have been crucial for formulation of recommendations and evaluation of the recent proposal by the European Commission to harmonize VAT digital reporting requirements in the EU (WP3). Specific analysis of the common system of digital reporting in the European Union was provided in three papers, namely “VAT in the Digital Age. Real-time digital reporting based on e-invoicing for businesses”, a co-authored paper “European Union - Proposal for a Secure Digital Reporting Standard for Intra-Community Transactions” and an extended version of the latter paper in a form of a book chapter “Secure DRR to Tackle EU VAT Fraud”. The final paper written in the framework of VATTECH concerns a comparison of several technology based VAT tools being currently used in selected Member States (WP1) of the European Union and evaluates these tools and their use from the perspective of taxpayers’ rights, the underlying principles of the EU VAT system, and the established legal framework of the EU law.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

VATTECH addressed a gap in legal research as to a comprehensive, multidimensional analysis of opportunities and challenges of new technologies in VAT administration. I consider the main contribution of VATTECH to broaden the focus of both the academic, as well as policy debate on the preferred technology based tools for combatting VAT fraud to include taxpayers’ rights enshrined in sources such as the Charter of the Fundamental Rights of the European Union and identify clear challenges to be remedied. Furthermore the contribution has been to identify legal opportunities and challenges of new technologies in VAT, not only in the legal design of the technology tools, but also, the manner in which these tools are used by tax administrations, including consequences for taxable persons. One of the results of VATTECH is a recommendation to further coordinate the procedural rules related to the operation and reliance on technology by tax authorities of the Member State. VATTECH combined several legal perspectives, including tax, human rights, data protection, EU and international law, which has been one of its innovative features.
VATTECH has been timely, and received a lot of attention in the context of accelerated introduction in a number of Member States of tools including e-invoicing and digital reporting, as well as the proposal by the European Commission to harmonize digital reporting requirements in Europe. Results of VATTECH were not only presented at a large number of academic conferences but also have served as the basis for contribution to the VAT Expert Group during consultation of the “VAT in the Digital Age” proposal by the European Commission. Thus, VATTECH contributed to the development of the future harmonized VAT digital reporting requirements in Europe. The project provided insight as to preferred, future, legitimate and fraud proof, technology based VAT system.
VATTECH had a pivotal impact on my academic career. It allowed me to build strong international network and opened doors to future collaborations in a framework of joint research projects, teaching at numerous international tax law master and post master programmes. It also allowed me to establish closer professional relationships with business and tax administration representatives. I believe that my research in the framework of VATTECH has allowed my to become a member of the VAT Expert Group at the European Commission. It has also been a stepping stone for fulfilling requirements to become an Associate Professor in Denmark and in Sweden. Even though the project has been now concluded, the general interest in the main findings and in follow-up investigations has resulted in invitations to present at four conferences and seminars in 2024. Further publications on legal issues related to VATTECH are also envisaged.

Presentation of the results of VATTECH at the Nordic conference on law and technology