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Greece is emerging as a leader in combating VAT fraud through innovative digital solutions like electronic reporting, e-invoicingElectronic invoicing - widely referred to as e-invoicing - is the exchange of a digital document between a supplier and a buyer. E-invoices are issued, transmitted and received in a structured data format that enabled automatic and electronic processing. They contain data in a machine-readable format so that an AP system can read an invoice without manual data entry, leading to faster and more efficient invoicing., and the promotion of electronic transactions.
These methods are proving highly effective in reducing VAT fraud and reducing the country’s previously substantial VAT gapThe difference between the amount of VAT revenue due to a tax authority and the amount actually collected; offering a blueprint for tax authorities worldwide seeking to leverage digital systems to enhance tax collection and clampdown on acts of fraud.
The role of digital tools in reducing VAT fraud
Greek Prime Minister Kyriakos Mitsotakis has recently highlighted the country’s success in slashing VAT fraud, largely due to its adoption of digital measures.
The country’s VAT losses have decreased by 50%, thanks to reforms aimed at enhancing tax transparency and promoting electronic payments.
Key initiatives include the implementation of the myDATA electronic reporting platform, the interconnection of cash registers with point-of-sale (POS) systems, and the expansion of e-payments.
Between 2015 and 2021, Greece saw VAT revenues increase from 8.7% to 11.7% of total consumption, while the VAT gap – a measure of uncollected VAT – fell from 26% to 17.8%.
Although the gap remains one of the highest in the EU, these reforms have laid the foundation for further reductions.
How myDATA reporting and POS integration tackle VAT fraud
The introduction of myDATA, an electronic platform for transaction reporting, has been a game changer for VAT collection.
By automating the reporting process and ensuring real-time visibility into transactions, tax authorities can more effectively monitor compliance and detect discrepancies.
In combination with the interconnection of cash registers to POS systems, this digital ecosystem makes VAT fraud more difficult to conceal.
One of the biggest contributors to VAT reduction has been the surge in card payments, which are easier to track than cash transactions.
The COVID-19 pandemic accelerated the adoption of digital payments, further aiding Greece’s efforts to close the VAT gap. Between 2017 and 2021, these measures helped reduce the VAT gap from €6 billion to €3.2 billion, and further reductions are expected in the coming years.
Pre-filled VAT returns: A future measure to combat fraud
Looking ahead, Greece is planning to introduce ‘locked’ pre-filled VAT returns, which would prevent businesses from altering tax data on their revenue and expenses.
This measure is expected to shrink the VAT gap even further by limiting opportunities for fraud.
By 2026, the VAT gap is projected to fall to 9%, potentially generating an additional €2 billion in tax revenue.
Lessons for other tax authorities
The Greek case illustrates how digital reporting, e-invoicing, and electronic payments can be powerful tools for reducing VAT fraud.
These solutions allow tax authorities to closely monitor transactions in real time, reducing the opportunity for evasion and increasing compliance.
As countries worldwide grapple with VAT fraud, Greece’s approach offers a roadmap for leveraging technology to improve tax collection and transparency.
By embracing digital methods, tax authorities can make significant progress in closing their VAT gaps, enhancing public revenue, and supporting fairer economic systems.
What does it mean for businesses?
As more tax authorities around the world make digital reporting and processes mandatory as they strive to combat VAT fraud, non-compliant businesses will be under more scrutiny than ever before; their errors and issues being instantly flagged by technology.
There really is no hiding place for companies at risk of non-compliance.
Tax teams must first act to ensure accuracy at source by ensuring their master data is clean and complete. Quality master data is integral to VAT management, from determination to application and remittance.
In addition to data, businesses must also ensure they have best-in-class tax and invoicing solutions in place to reliably and accurately determine taxes and produce compliant invoices.
Any organisation that fails to comply with regulations in a technology-led tax jurisdiction is increasingly likely to face penalties as the era of digitalisation accelerates.
