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EU CESOP payment system & blockchain to detect VAT fraud

The European Commission’s Directorate-General for Taxation and Customs Union (DG TAXUD) experimenting with a payment tracking and blockchain technologies to help combat Value Added Tax fraud.

Blockchain to combat EU VAT fraud

The EC is looking at how shared ledger blockchain could be used to enhance the operations of the 1 July 2021 e-commerce VAT package. This includes the sharing of sellers’ taxable transactions in each other’s jurisdictions.  Blockchain presents attractive features around security of data which is difficult to forge, but has yet to prove its credentials of privacy of users’ data. Also, its lack of speed, interoperability and heavy energy consumption makes it doubtful for large data usage.

Central Electronic System of Payment Information (CESOP)

The EC launched the development of a centralised database of cross-border payments following the unveiling of its Tax Package in July 2020, which included the commitment to improve member state tax authorities’ data analytics and sharing to fight an estimated €50billion in VAT fraud. This included the seventh Directive on Administration Cooperation (DAC 7) which provides for automated exchange between tax authorities of marketplace data on sellers’ transactions.

Member states would be obliged to register in CESOP payment transactions made cross-border by the private individuals. This information on the transaction consideration which would be provided by the sending and receiving banks

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Data collected by CESOP:

  • Name of Payee
  • VAT/Tax ID payee (if available)  IBAN payee or identifier
  • BIC PSP
  • Address payee
  • Date & Time
  • Amount and currency
  • MS of origin
  • Transaction ID
  • Payment instrument

EU fights VAT fraud with TNS and CTC

The EU Transaction Network Analysis TNA also works to support the detection of VAT fraud. EU VAT in the Digital Age reforms include a channel for harmonised Digital Reporting Requirements (DDR) and Continuous Transaction Controls CTC by EU states. This grew from the 2020 Tax Packageproposals for a fairer and more efficient EU tax regime.

Taxpayers may determine or verify the right VAT calculations on individual or batch transactions with our Advisor and Auditor services.

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