The Netherlands to fight VAT Fraud with TNA and blockchain technology

May 29, 2019 | VAT Updates

After Poland was allowed to introduce Split Payment mechanism to fight VAT Gap and Fraud, which is in effect since 1 March 2019(1), the Dutch government was asked to analyze the possibility to apply the same measure within its territory(2).

What is Split Payment?

Split Payment is a method where the VAT charged by the supplier to his buyer is paid by the buyer on a separate and block VAT bank account, as a result the supplier cannot freely dispose of this VAT. The mentioned separate VAT account of a supplier can be used for restricted purposes only, for example payments of the VAT liability to the tax authority or the payment of VAT on invoices received from suppliers.

Possibility for the Netherlands

For all Member States which are in similar situations to the Polish one, there is the possibility that the European Council will approve this measure for them as well.

Being said that, the Netherlands is in a better situation than Poland, where the VAT Gap calculated for the year 2016 was 4% in comparison to the 20.8% Polish one (3).

Looking for alternatives

Since the Dutch government is looking to apply measures with a more targeted approach and less administrative burden, split payment is not being considered. Besides, its financial disadvantages for businesses such as bank costs and adverse cash flow effects, makes it even less desirable.

With the introduction of TNA (Transaction Network Analysis), which would increase the speed at which authorities can uncover and act on suspicious activity, and investigating the application of blockchain technology, the Netherlands is looking to decrease VAT Fraud with more focused measures to detect fraudsters and limiting the burden for business and the tax authority.