Tax authorities demand more, faster and more frequent data

The fierce debate on a fair distribution of tax revenues by governments has reached new heights. Tax shift due to risk allocation of transactions to low tax rate countries and even globalization itself are under political discussion.

Protectionism is an important part of the strategic objectives of certain governments. Additionally, the discussion concerning BEPS and state aid have caused fiscal uncertainties that force companies to reevaluate risks. In some cases this can even lead to changes in the business model.

Current business models are put under a magnifying glass, but also the change of business models – for instance from commissionaire to limited risk distributor – will get attention from the tax authorities.

 A reorganization in the Dutch Tax and Customs Administration has established the objective that routinely and labor-intensive, yet relatively simple control activities are to be taken over by automated processes.

That is, modern technologies appear to substitute to role of the ‘traditional’ tax auditor. The idea is that new computer systems and data analysis software will allow data files from different source systems to be connected, thereby enabling more efficient tax control and requiring fewer ‘traditionally educated’ employees.

The objective also holds that the tax authorities have earlier and faster access to relevant tax data and that this data is periodically provided by tax payers in a format that is prescribed by the government and that can easily be read and immediately reveal inconsistencies in fiscal activities.

Transfer pricing and/or VAT regulations are still not sufficiently taken into account in the development of VAT-automation regarding business processes.

This makes that the data that is captured in a vast amount of financial administration, can ‘impossibly’ be compared with that which is stated on the tax returns.

All chapters

1. Introduction: Relevant tax data from Transfer Pricing and VAT: explaining the ‘Why’, ‘What’ and ‘How’
2. The auditor is not (yet) a risk analyst
3. New tax legislation in the UK: 'Tone at the top'
4. More attention for Transfer Pricing
5. More attention for VAT
6. Tax authorities request more, faster and more often tax data
7. SAF-T rolled out in more countries
8. 'The impact on in-house tax function' and 'Preaudit before submit'
9. Realise a joint tax responsibility
10. Read: complete article with all chapters and links to follow up articles (in depth)

Above is a translation of article published in Vakblad Tax Assurance. Dutch version can be downloaded for free: Download click the link