Periodic Reporting for period 1 - TXpp (A technological solution for the 50 billion EUR VAT fraud problem)
Reporting period: 2018-12-01 to 2019-05-31
Each year tax authorities and factoring agencies are losing billions of EUR because of invoicing fraud. If there was a simple way to assess the authenticity and integrity of an invoice, various types of fraud would be solved. Through the usage of blockchain technology we are building a secure database, called TX++ that will offer a solution. Within our solution we will not actually store invoices, but only encrypted invoice fingerprints. As a result, we're able to identify all VAT fraud without collecting taxpayer data. The database will guarantee the privacy of citizens and return stolen VAT fraud to the national treasuries. Furthermore, TX++ will disrupt the factoring market by creating a digital marketplace where companies can put up their invoices for auction. As invoice registrations are communicated to tax authorities, factoring companies have a lower risk associated with transactions and access to a huge pool of invoices.
We performed a feasibility study that included legal, market, technological and economic research. Our legal analysis provided us with in depth knowledge of EU VAT legislation. Moreover, during our market research we estimated how much money our target countries can save through TX++. We also investigated how factoring companies are trying to innovate. During our technical research we found that by leveraging parallelisation techniques and by making use of specialized hardware it is possible to increase our throughput. Lastly, the economic research provided us with a quantifiable analysis of how the benefits of TX++ will outweigh its costs. We will disseminate these results through different online platforms, such as our website stopvatfraud.com and presentations at Ministries of Finance and high-level events.
In contrast to past ideas to solve VAT fraud (reverse charge, split payments, centralized clearance systems and the definitive VAT system), TX++ will identify all fraudulent companies whilst safeguarding personal data of its users. Moreover, the cost of implementation is significantly lower than that of reverse charge and split payments. TX++ also will make the factoring industry more efficient. Whereas invoices are currently often verified through third parties that investigate the creditworthiness of debtors and clients, TX++ will offer a database with already validated invoices. This will release a vast amount of capital and improve access to financing for SMEs in the EU.