Tax Revenue Suite (TRS): Digital Tax Administration (DTA) for B2C Implementation Overview

Digital tax administration of B2C taxpayers ensures completeness of revenue account-ing and taxation of retailers through real-time collection of fiscal receipts.

→ Supports hardware and software online electronic cash registers (OECRs).
→ Fiscalization of mortar & bricks and e-commerce retailers, real-time collection of fis-cal receipts, taxable revenue, and tax payable calculation.
→ Consumer motivation to demand receipts and the field work of tax officers to control retail point of sales.

Transcript

1. Trusted Global Tax Gap Advisor & Digital Solution Provider for Tax Administrations Tax Revenue Suite (TRS) Digital Tax Administration (DTA) for B2C Implementation Overview Implementation of DTA system for VAT, GST and other taxes administration of B2C taxpayers can grow annual tax revenue by up to 100% info@taxtech.digital www.taxtech.digital G04
2. 2 DTT’s Tax Revenue Suite (TRS) TRS is a suite of digital taxtech products aimed to increase the state's tax revenue Tax Revenue Suite (TRS) Digital Tax Administrati on (DTA) •DTA for B2B •DTA for B2C •DTA for C2C DRF (Digital Return-Free Tax Regime) DEA (Digital Excise Administrati on) DDA (Digital Desk Audit) DMTA (Digital Municipal Taxes Administrati on)
3. DTA for B2C Implementation Goals and Key Objectives 100% COMPLETENESS OF RETAIL (B2C) REVENUE ACCOUNTING Via collecting of all simplified tax invoices (fiscal receipts) in real or near real-time. 100% COVERAGE OF RETAIL TAXPAYERS BY DIGITAL TAX AUDIT PROCESS Without adding a tax administration headcount. UP TO 100% GROWTH Of the annual tax revenue from B2C taxpayers. Nationwide implementation of OECRs (Online Electronic Cash Registers) to enable real-time collection of all fiscal receipts by tax authorities. Automatic verification and comparison of collected receipt data with the tax returns, payment, and other data. Automatic calculation of the simple tax gaps and remediation claims management (digital tax audit). Improved tax compliance via field audits of POS (point of sale) locations. Implementation of public control and incentives for consumers to demand receipts from retailers. 3
4. 4 Differences in the Tax Administration of B2B and B2C VAT Taxpayers Business to Business (B2B) Business to Consumer (B2C) VAT Taxpayer VAT Taxpayer Legal entities and entrepreneurs applying general tax regimes VAT Taxpayer Non-VAT Taxpayer Retailers vs. private individuals or businesses applying simplified tax regimes Focus on the administration of VAT deductions, to ensure completeness of accruals Focus on ensuring the completeness of revenue accounting via recordkeeping of all invoices (fiscal receipts)
5. DTA for B2B DTA for B2C Simplified Architecture 5 Data from online electronic cash registers (OECRs) VAT Taxpayers (B2B): Manufacturers Importers / Wholesalers Retailers (offline and online) VAT & Non-VAT Taxpayers (B2C): Retailers (offline and online) Private individuals Standard Tax Invoices (VAT Invoices) Simplified Tax Invoices (Fiscal Receipts) Electronic VAT invoices Pre-filled Electronic VAT returns
6. Traditional Approach to B2C Tax Administration: Manual, Lengthy, Prone to Errors, and Expensive Process 6 Long delays in tax reporting due to the lack of online data and human resources in the tax administrations Very timely, expensive and error-prone as requiring a lot of human and other resources MANUAL CHRONOMETRIC SURVEYS OF CASH PROCESSING AT POS Increased complexity and costs for both, tax administrations and taxpayers Taxpayers are forced to bring cash registers to tax administrations for the manual inspection ANNUAL MANUAL ADMINISTRATION OF MILLIONS OF OFFLINE CASH REGISTERS LARGE TAX GAP Long time to substantially decrease the circulation of cash with the traditional tax administration approach ATTEMPTS TO INCREASE SHARE OF NON-CASH PAYMENTS The use of cash has been on the rise globally before the pandemic and non-cash payments still have a minor share in many countries
7. Four Generations of VAT/GST Administration Systems for B2C Taxpayers 7 Generation Major Characteristics  Lack of standardization of cash register equipment or Point of Sales (POS) solutions. Basic requirements for the details of the simplified tax invoice (fiscal receipt). Large and uncontrolled tax gap  Standardization of the structure of the simplified tax invoice. Secure storage of fiscal receipts in fiscal memory at the point of sale. On-demand access to fiscal memory for tax officials.  Like Generation 2, but with secure automatic transmitting reports on daily turnover to the tax authorities via communication networks (e.g., cellular).  Secure automatic transmission of each simplified tax invoice (fiscal receipt) to the tax authorities in a real-time or near real-time mode. Transition to the digital tax administration We propose the implementation of the Gen4 focusing on the completeness of B2C revenue accounting via collection and record keeping of all fiscal receipts
8. Causes of the Tax Gap and Benefits of Digital VAT Administration 8 Tax Primary Sectors Tax Gap Causes 1 DTT’s Digital Tax Solutions 2 Potential Outcomes VAT / GST / Other Indirect Taxes B2B Overstated tax deductions Adjustments DTA for B2B Growth of VAT and other indirect tax collection up to 150% VAT Tax Gap reduction by 5-10 times Millions of self-employed registered as taxpayers B2C (business-to- consumers, e.g., retail) Understated income Adjustments DTA for B2C with Online Electronic Cash Registers (OECRs) B2C (online retail, cross- border commerce) Offshore operations (non- resident digital online platforms and service providers) Non-filing of tax returns DTA for Online Economy and Self- Employed [1] Source: DTT’s analysis and estimations [2] For more details, please visit out site at: https://taxtech.digital/en/solutions/
9. The General Concept of DTA for B2C 9 Hard copy or digital fiscal receipt with QR code OECR Retailer Consumer Tax Administration (TA) Digital fiscal receipt and other data for TA Receipt scanning mobile app = IF 1. OECR prints/sends a fiscal receipt to the consumer (either hard or digital copy) and the Tax Administration (digital copy in near real-time) 2. Consumer has the incentive to send his copy of the receipt to the Tax Administration for verification 3. The tax administration receives transaction data from both the merchant and consumer and can verify a match Optional Fiscal Data Operator (OFD) OECR sends unaltered fiscal data to tax authorities in real-time or near real-time for automatic tax base and tax payable calculations The OECR Concept 1 2 3 How it Works
10. DTA for B2B DTA for B2C Standard Tax Invoices (VAT Invoices) High-Level Architecture of DTA for B2C System 10 Electronic VAT invoices Pre-filled Electronic VAT returns Fiscal data from OECRs VAT Taxpayers (B2B): Manufacturers Importers / Wholesalers Retailers (offline and online) VAT* & Non-VAT Taxpayers (B2C): Retailers (offline and online) Private individuals Simplified Tax Invoices (Fiscal Receipts) Near Real-time Transmission Periodic Transmission DTA for B2B ensures error-free collection of VAT invoices, completeness of accruals and minimization of the tax gap DTA for B2C with a focus on the completeness of B2C revenue accounting via recordkeeping of all tax invoices (fiscal receipts) Core Tax Administration Information System (CTAIS) Integration with: Registers of invoices, Personal Accounts, Audits, Taxpayer communications, Web portals, Mobile app Tax Portal Open APIs Open APIs [*] Value Added Tax, Goods & Services Tax, and other indirect taxes, hereinafter referred to as VAT [**] Track & Trace system can use fiscal receipts to remove goods marking codes from the circulation Track & Trace System **
11. Project’s 1st stage components Project’s 2nd stage components Integration with External and Internal Systems 11 Functional Architecture Components for Digital Tax Administration in B2C Taxpayers and OECRs Registration Collection of Tax Invoices (Receipts) from OECRs Fiscal Data Logic Control & Verification Calculation of the Taxable Revenue and Informing Taxpayers Risk Analysis and Tax Gap Detection Tax Officer Workplace Base Functional Modules POS Field Audits Consumer Incentives to Demand Receipts / Partner Ecosystem Advanced & Additional Taxpayer’s Portal & Tax Administration Information Systems Taxpayer Digital Communication and Notification System Fiscal Data Repository Taxpayer Account Digital Desk Audits & Claims Management 1 2 1 1 1 1 2 OECRs Receipt Analysis Nomenclatures Accruals
12. [*] The complete list of functional requirements should be created during the initial phase of the project's implementation. 12 Base DTA for B2C Capabilities* Registration of retail taxpayers and OECRs via visual interface integrated into the Tax Portal Real-time or near real-time collection of fiscal receipts from taxpayers / OECRs Format-logic control, data aggregation and secure storing of receipts in the Tax Administration Data Repository Calculation of the taxable revenue, the tax base, and informing taxpayers Risk analysis, detection of violations, and calculation of tax gaps Digital desk audit for the simple tax gap and violation detection Claims management and communication with taxpayers Tax Administration’s Tax Officer Workplace for tax officials working with taxpayer accounts Registration of Taxpayers and OECRs Receiving and Processing of Fiscal Data Format and Logic Control Calculation of the Taxable Revenue Risk Analysis and Tax Gap Detection Digital Desk Audit Tax Officer Workplace
13. Online Electronic Cash Registers Provide Near Real Time (NRT) Fiscal Data to Tax Administration and Consumers 13 OECR with the optional Fiscal Printer Fiscal storage Fiscal Data Data Consumer Payment (cash, cards etc.) Paper receipt Data (Real Time) Data Digital receipt to registered consumers Digital receipt by consumer’s demand Mobile app POS Verifies receipts in the tax system in return for bonuses, cashback, tax incentives, etc. 3rd party loyalty service providers Tax incentives Fiscal Data Operator (FDO, optional) Data (NRT) with offline mode Data Data Data Tax Administration Tax administration and fiscal control
14. Modern OECRs and Additional Services for Retailers 14 MORE THAN JUST CASH REGISTERS A wide variety of OECR form factors are available. From smartphones and tablets with additional card readers for SMEs to professional retail equipment for top retail chains They support complete retail management solutions with point-of-sale automation, inventory, loyalty, reporting, gift cards, customer profiles, purchase orders, eCommerce, etc. Online Electronic Cash Register as a Service (OECRaaS) is also available from the 3rd party cloud providers to support online retailers and cross-border trade
15. Fiscal Data Flow 15 Retailer Consumer Fiscal Data Operator (FDO) (optional) Tax Administration Payment Hard copy or digital fiscal receipt Data Digital receipt Confirmation Receipt validation and complaints requests Responses with verification results and digital receipts on demand Demands fiscal receipt from retailer and files complaints to the tax administration if omitted Automatic tax administration and control Processes the fiscal data from retailer Registers and runs online ECRs OECR
16. OECRs automatically submit fiscal receipts to the DTA system Taxpayer submits tax returns via the tax portal or API 1 5 3 7 2 8 4 6 Collection of receipts and returns Format and logical control VAT/GST/other rates control Data aggregation, comparison, risk analysis, calculation of the tax base and gaps Creation of electronic claims, if gaps and/or violations are discovered Communication of the claim to the taxpayer requesting justification or correction Taxpayer submits adjustments to tax return or provides justification If gaps/claims are closed and the deadline for desk audit expires, system closes the audit with a decision to refund the taxpayer, if required The Digital Desk Audit Process for B2C 16
17. 17 Taxpayer Digital Communication (TDC) System The Taxpayer Digital Communication system manages notifications and simplification of tax administration for taxpayers. Effective communication system has a significant and positive influence on taxpayer compliance. TDC should support: Secure Messaging Chat Outbound Notification Integrations with the Tax Portal and Auditor's Workplace TDC enables the automatic processing of violations based on the identified tax gaps Registering a violation in compliance via identified VAT gap Informing a taxpayer about the identified violation Inviting a taxpayer to remedy violations voluntarily by correcting data The process is fully automated and does not involve a tax officers
18. Advanced Functional Modules The complete list of functional requirements should be agreed during the initial phase of the project's implementation. 18 The advanced DTA modules provide the following major functionality * Field Audits of Points of Sale (POS) > Register of tax authority employees responsible for POS field audits. > Register of taxpayers who must use cash registers. > Register of taxpayers’ retail units, where they must use cash registers. > Searching and viewing the retail units and points of sale in the registry and on the map. > Register of management companies that lease premises or areas to taxpayers who are liable to use cash registers. > Tax officer dashboards< analytics and reporting. The Motivation of Consumers to Demand Fiscal Receipts > Access to the receipt repository via a mobile app and software interfaces (APIs) for consumers and independent software developers. > Receipt verification via mobile tax application. > Proof of purchase. > Application of tax deductions and other incentives * > Access control and security.
19. Inevitability of control Public Demand and Control are Important in Influencing Retailers to Hand Out Valid Receipts 19 Automatic alerts to Tax Administration Consumer demands a receipt from the retailer in exchange for incentives Tax Administration confirms validity of scanned receipt 3rd party loyalty services providers interchange receipt and consumer data with with banks, brands and retailers Cashback, discounts, tax refunds and other incentives Open API Consumer scans receipt and sends it to the TA for validation The retailer did not hand out a receipt or The receipt has not been validated by the tax application Every consumer could be a public controller Retailers can’t conspire with all consumers in attempts to evade receipts and to forge public control’s results Retailers can’t avoid The power of the crowd Automatic workflows to launch tax administration processes Historical data, reporting, AI Less paperwork. Improved retail tax revenue collection My Receipts If required by legislation, each receipt generated by online cash registers has a Quick Response (QR) code that enables customers to verify the transaction by comparing it to the information maintained by the tax administration
20. Consumer Tax Administration (TA) 3rd party loyalty service providers Brands, Retailers, Banks Downloads official tax mobile app to scan paper receipts Develop free receipt scanning and public control app for consumers Develop loyalty program apps with access to receipt database Pay for access to the user base of the 3rd party loyalty providers or build their own Asks and receives a receipt at POS Ask consumers to scan receipts via mobile app and send it to TA or FDO for verification Encourage consumer to scan receipts via loyalty app instead of tax app Provide cashback, discounts and other incentives to consumers in exchange for loyalty and transactions Scans QR code from the paper receipt Verifies paper receipt’s scan sent by consumers Encourage consumer to create a user profile if he wants to get cashback and discounts Requests digital receipts from e-commerce provider Provides open API for the 3rd party developers to access receipt database Sell ads to brands, retailers, banks… Files a complaint if the receipt has not been handed out by the retailer The Ecosystem to Grow Public Demand and Control for Receipt Validation 20 My Receipts Tax mobile app
21. Additional Functional Modules The complete list of functional requirements should be agreed during the initial phase of the project's implementation. 21 Additional DTA modules provide the following major functionality * Text Analysis of Tax Invoices > Content analysis of tax invoices to extract sold items’ names, codes, prices, quantities etc. > Verification and matching of items’ names and codes with the Nomenclature of goods, works, and services Nomenclature of Goods, Works, and Services > Register of standard names for goods, works, and services. > Integration with international catalogs of goods like GS1. > Integration with the national product marking, tracking, and tracing system. Calculation and Accrual of Taxes > If a country uses non-declarative (no filing of tax return) tax regimes, the system uses fiscal data to calculate the tax base based on revenues, automatically calculate tax, and generate accruals. > The system should receive additional information from banks on payment transactions because cash registers do not cover all revenue.
22. 22 Integration with Tax Administration’s IT infrastructure DTA system components should be integrated with the existing Tax Administration Information System(s). Key integration points: Unified authentication of tax administration employees. Registry of taxpayers. Audits system (tax control activities). The Digital Desk Audit (DDA) module requires integration with or creation of the taxpayer digital communication system. The complete list of integration requirements and methods should be developed during the initial phase of the project's implementation. Advanced & Extended DTA for B2C Base DTA for B2C Registry of Taxpayers Taxpayer Digital Communication System Internal Authorization and Authentication Audits
23. The Roadmap for Implementing the Digital VAT Administration System for B2C 23 [1] The estimation above is based on ideal conditions projected into the future. Changes in business conditions, requirements, and other influencing factors may change the current estimate. Actual duration of implementation project to be defined depending on the regulation, customer requirements and other factors. Stage Duration From the Start 1. Analyzing the regulatory framework, the market of cash registers, and the development of the DTA concept for B2C. 3 months + 3 months 2 Development and approval of the requirements for OECR equipment and formats of fiscal documents. Development of recommendations for manufacturers of cash register equipment for the development of new models and modernization of current models. 3 months + 6 months 3 Work with manufacturers of cash register equipment to develop new or upgrade current models that taxpayers can use. 6 months + 12 months 4 Implementation of the functional module for registration, reception, processing, and storing of tax invoices. 6 months +12 months 5 Conducting a voluntary pilot project to evaluate OECRs by transferring fiscal receipts to the tax authorities. 9 months +21 months 6 Beginning of compulsory use of cash registers by taxpayers. + 21 months 7 Implementation of data aggregation and visualization module, a tax revenue calculation module. 6 months +27 months 8 Finalization of implementing the Base DTA modules and the start of compulsory use of OECRs by all taxpayers. +36 months 9 Implementation of the consumer motivation module. +6 months +36 months 10 Deployment of other modules of the DTA system (if necessary). + 12 months +54 months
24. DTA for B2C Implementation Outcomes and Benefits 24 For Retailers Versatility and compatibility with various types of cash registers from smartphones to specialized devices Ease of installation and integration with POS systems Lowering cost of tax compliance, new opportunities to improve consumer loyalty For Tax Authorities Improved annual retail tax revenue collection by up to 100% Big data, analytics, ML, and AI for standard & ad-hoc reporting and fraud detection Direct feedback from citizens, new opportunity to introduce new digital services For Citizens Additional source of monetization via cashback and discounts in exchange for scanned receipts Collection of electronic receipts helps to analyze cash and digital personal expenses
25. About Us Digital Tax Technologies (DTT) is an international expert in tax gap minimization, a trusted digital transformation advisor & solution provider for national tax administrations. We help tax administrations around the world to reduce the tax gap, improve tax revenue collection and reduce the share of the shadow economy. Our mission is to increase global fiscal transparency, improve tax compliance and administration, and ensure fair competition and welfare. Our team consists of experts with experience in digital tax administration advisory and implementation in various European, CIS, Middle East and African countries. 25 info@taxtech.digital www.taxtech.digital
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