Annex G
INVOLVEMENT OF A TRUSTED THIRD PARTY
The Committee asked:
Would the involvement of a trusted third party,
as we understand is integral to the Streamlined Sales Tax in the
USA, assist in reducing MTIC fraud whilst at the same time reducing
the risk for the innocent trader that his input tax claim will
be denied?
The Streamlined Sales Tax Project, which began
in March 2000, was created by the federal states in the US, with
input from local governments and the private sector, to simplify
and modernise sales tax collection and administration across the
states, where differing rates and legislation created a large
burden on business. The role of the Trusted Third Party included:
— Receiving required information on
transactions from a seller and providing software for determining
the taxability of a transaction, the appropriate state and local
tax rate, and the tax due.
— Providing tax information to sellers
at the time of the sale, so that information on tax due is available
to a customer before completion of the transaction.
— Entering into arrangements with credit
card and other electronic payment processors so that tax(es) owed
to the state or local government could be remitted directly to
the TTP for transmittal to the state.
— Providing all transaction and return
information to the states (and local governments where appropriate)
along with the tax remittance.
The UK has participated in OECD discussions
on the role of trusted third parties in tax collection mechanisms.
At the time, consultations with business revealed concerns regarding
both costs and sensitivities with commercial data. The Government
understands that the same issues have arisen in the Streamlined
Sales Tax Project where the role of trusted third parties is not
a major aspect of the overall changes.
We are open to new ideas for combating MTIC
fraud and are continuing to evaluate the role of trusted third
parties, although we do not see this as a solution in the short
term due to the complexities involved. We also wonder whether
any third party would be willing to take on the commercial risk
associated with the collection and payment of the tax, given the
scale of the organised criminal attack on the VAT system that
we have seen in recent years.
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