(GST) compliance obligations (pdf, 5.62 MB) - Ernst & Young T ...

Where to
from here?
The VAT complexity faced by MNEs leads
to uncertainty, errors, disputes and
increased cost. For companies, 100% VAT
compliance seems at best very costly and
at worst impossible. The current situation,
based heavily on local rules, is also
damaging to tax administrations, which
are experiencing unprecedented calls on
their scarce resources in collecting vital
tax revenues and preventing tax fraud.
We believe that reducing the compliance
burden can improve VAT compliance
performance by the largest VAT taxpayers,
thereby protecting vital tax revenues as
governments address budget deficits.
All parties have a role to play. MNEs need
to take their multinational VAT compliance
obligations seriously. Multinational VAT
compliance must remain a management
priority. All over the world, MNEs must
continue to devote resources to keeping
abreast of developments that affect their
VAT position training staff and adopting
adequate VAT accounting processes and
controls, in recognition of the large volumes
of VAT revenues that flow through their
accounting systems.
At the same time, tax administrations
need to address MNEs’ legitimate concerns
about the burden of multinational VAT
compliance, which increases costs, creates
high levels of tax risk and has an adverse
effect on their business operations.
We believe that individual tax
administrations, trading blocs, such as the
EU, and international organizations, such
as the OECD, should make multinational
VAT reform a priority. This is a pressing
issue as globalization continues apace.
We applaud the work of the OECD in
producing Draft VAT Guidelines aimed at
bringing clarity and consistency to the
VAT treatment of cross-border activities.
We also commend the continuing efforts
at harmonization and simplification
undertaken by the EU, including programs
related to e-invoicing and the extension of
the “one-stop-shop” regime for foreign VAT
registrations. We hope that other countries
in Europe, such as Switzerland and Norway,
continue to align their VAT legislation with
the EU where practicable. We would also
encourage greater regional cooperation on
VAT legislation and administrative practice
in other regions of the world, such as the
Americas, Africa and Asia Pacific.
We would also like to see MNE taxpayers
and tax administrations enter into closer,
more open relationships based on trust
and transparency. This may be achieved
both through informal changes in attitude
and through formal programs. Examples
around the world include the use of
binding rulings, taxpayer guidance, the
use of new technology to allow taxpayers
to fulfill their obligations remotely, the
allocation of designated tax inspectors
and the introduction of programs such as
“horizontal monitoring” in The Netherlands
and the ATO’s ACA program in Australia,
which encourage taxpayers to adopt robust
processes and disclose errors, in return
for “reduced penalties” and “light-touch”
oversight.
MNE taxpayers and tax administrations
all have much to gain from greater
multinational simplicity, harmonization,
clarity and fairness in the VAT system —
reduced costs, less tax controversy, better
use of scarce resources and improved
VAT compliance performance. Achieving
100% VAT compliance may no longer be an
unattainable dream.