Technology solves missing trader intra-community (MTIC) fraud. This should come as no surprise. MTIC is technology-intensive fraud – its solution should also be technology-intensive.
MTIC is getting to be an out-dated term. Now that missing trader fraud has move into services it is no longer confined to intra-community trade, and the older acronym should be adjusted to MTIC/MTEC fraud (with MTEC standing for missing trader extra-community).
MTIC/MTEC fraud is fully digitized (the supply, the movement of the supply, and the funding). The consequences should be clear. MTIC/MTEC must be prevented (before the fact), not pursued (after the fact). In the digital world everything evaporates when pursued. Technology is both the causative agent and the most effective counter-measure for this fraud.
We have known the details of the three major technology-intensive proposals for solving MTIC/MTEC since 2007: the VAT locator number (VLN); real time VAT (RTvat), and certified tax software (D-VAT). This paper endeavors to contribute to the debate that the Commission has opened on this topic with its recent Green Paper by comparing and contrasting these three proposals.
Both the VLN and RTvat are mandatory systems. The VLN focuses on securing every supply, whereas the RTvat focuses on securing every payment. D-VAT certification differs in both respects. It can be adopted on a voluntary basis (per taxpayer) and achieves a secure remission of VAT through trusted third parties. These third parties are providers that stand between the taxpayer and the tax administration, complete all filings, and remit payments – guaranteeing the accuracy of the return and the satisfaction of the tax due.
There is a considerable amount of central control under both VLN and RTvat proposals. Central (government) computer systems will track each transaction (VLN) or payment (RTvat). Under D-VAT certification there is no central tracking, just assurance that each transaction is completely and accurately reported because the systems performing these operations are certified and guaranteed.
Finally, both the VLN and D-VAT certification go to great lengths to avoid making fundamental changes in the way the EU VAT currently operates (the VLN perhaps even more than D-VAT certification). In addition, both VLN and D-VAT certification can be adopted one Member State at a time. The RTvat proposal differs on both accounts. It fundamentally changes the EU VAT into an origin system, and requires adoption by all Member States to be fully effective.
Richard T. Ainsworth,
Technology Solves MTIC - VLN, RTvat, D-VAT Certification
Available at: https://scholarship.law.bu.edu/faculty_scholarship/1465