VAT fraud can occur both at the governmental and business level. As such, making sure that the correct amount of VAT is both collected and returned is imperative. In order to determine if the requisite amount of VAT has been collected, it is necessary to see whether or not anything fraudulent has occurred in the reporting process.
VAT fraud can occur in a number of ways both intentionally and unintentionally. When it comes to filing expenses, sometimes a simple receipt is all that is needed if it is for a small amount, but when it is much larger, say for a hotel bill, then a proper invoice becomes necessary for the filing process. Fraud can occur when improper paperwork is submitted, or a misunderstanding of what is claimable occurs. This is why it is so important to make sure that a business is compliant with VAT regulations. VAT recovery technologies are one of the best ways to effectively combat fraud and ensure that both the business and the government are collecting the right amount of VAT.
The Benefits of Transaction Analysis
Performing a VAT analysis with software or with an institutionalized government auditing system is one of the primary ways in which VAT fraud can be detected. Taxes in general are a tricky area in which mistakes can be made by both parties, so performing an analysis with the most up to date reporting mechanisms is an excellent way in which to determine if any fraud has been committed.
If a business has accurately reported and filed all travel and business expenses that have been utilized in a timely manner, then an analysis can be performed regularly to ensure compliance. However, it should be noted that since VAT claims can be quite substantial depending on the size of the business, and the amount of travel required for employees, that it is quite important that a speedy recovery process is put in place. VAT refunds can be in large amounts. This is one of the reasons that a move to e-invoicing in Europe has become so popular. Government audits can take quite some time, so the advent of VAT technology products has greatly improved VAT recovery services and the refund turnaround process.
Combatting Fraud with VAT Recovery Technology
Using VAT recovery technology to effectively combat fraud can be performed in a number of ways to determine what the recoverable VAT should be. Some governments, such as the British one, have instituted a program of checks and control which most businesses have ingrained in their own auditing system.
Making sure that all employees are aware of what they can claim, and the proper paperwork that must be filed is one of the ways businesses are trying to reduce unintentional fraud. For example, an employee can claim expenses for themselves on a business trip, but if they entertained someone who is not on the company payroll than they cannot claim for any expenses regarding that individual.
Issues tend to arise when poor reporting mechanisms are in place which is why a uniform reporting process must be utilized. The move away from the audit system to the e-invoicing system such as in Europe, specifically Italy, is a prime example of this. To effectively combat fraud, accountability on both sides must be in place, and ease of access to information. VAT technology can aid in this, and streamline the process to effectively combat fraud at all levels.