In recent years, Poland has succeeded in reducing the VAT gap considerably. Among the many regulatory changes introduced, solutions using digital tools have played a key role. Progressive digitization, eg. introduction of electronic invoices.
In recent years, the activities of the Ministry of Finance have focused on tightening the VAT collection system, which is one of the pillars of the state’s budget revenue. The difference between the amount of expected VAT revenue and the amount of tax actually collected that goes to the budget is called the VAT gap. It includes losses resulting from tax evasion, tax evasion and administrative errors as well as losses related to fraud, resulting from the application of so-called VAT carousels.
Digitization of VAT payment processes
In order to reduce the amount of the VAT gap in Poland, the Ministry of Finance has in recent years taken many steps to digitize the VAT payment process. The most important are the introduction of mandatory monthly reporting in the form of the Uniform Control File (JPK), the removal of the paper circulation VAT declaration form or the implementation of split payment in B2B transactions, which ultimately replaced the reverse charge mechanism.
Since January 2018, micro-entrepreneurs (i.e. all entrepreneurs doing business in Poland) are required to prepare and send to the SAF-T tax office, i.e. a set standardized data containing information on economic operations for a given period, allowing easy processing.
On the other hand, the split payment mechanism introduced in November 2019 means that the payment for the service is transferred to two different accounts. The net worth is recorded in the seller’s company account, and VAT is transferred to a specially dedicated VAT account.
Visible effects – reduce the VAT gap
The actions of the Polish Ministry of Finance had real effects and generated real budgetary revenues. It was only in the years 2013-2017 that the VAT gap in Poland decreased by 13%, and in the following two years by a further 6%.
According to the report “Effects of the sealing of the tax system in Poland in 2016-2018” of the Polish Economic Institute, the legislative and administrative sealing measures could have resulted in an additional amount of PLN 51.8 billion in the budget received during of the three years (including social security Over the past two years, however, the efficiency of VAT collection has decreased – in 2019 only PLN 0.1 billion came to the budget due to the reduction in VAT gap, against PLN 4.6 billion supposed. In 2020, PLN $ 7.9 billion was expected, however the Center for Social and Economic Research (CASE) in its report titled “Quantitative Gap Analysis VAT in EU countries “predicts that as a result of the recession caused by the COVID-19 pandemic – the VAT gap in Poland could increase by up to 14.5%. The theoretical liability could therefore be greater than its estimated value for 2017, equal to 14.3%, and therefore greater than the EU gap – 13.7% (164 billion euros).
– Declining economic activity and financial liquidity problems contribute to the difficulties many companies have in meeting their tax obligations and, at the same time, can increase the incentives for non-compliance with tax regulations – he pointed Dr. Grzegorz Poniatowski, Scientific Director of Tax Policy at CASE and Head of the Team Preparing the Report.
What’s next with the tax gap?
In the opinion of economists, the COVID-19 pandemic and the resulting economic crisis have shown that the effect of sealing taxes strongly depends on the economic situation. It is easier to close the VAT gap during the economic boom, when in times of economic downturn, businesses begin to pay more attention to optimizing their tax obligations.
– An important component of the VAT gap is the underground economy, which will be very difficult to reduce in the face of global economic problems. In countries with the smallest VAT gap, such as Sweden or Finland, the share of the shadow economy in the economy is much lower than, for example, in Poland – said Dr Grzegorz Poniatowski, Scientific Director of Tax Policy at CASE and Head of the Report Writing Team.
Therefore, the reduction of the VAT gap should now apply to small transactions, the underground economy in the economy. In order to seal this system, according to economists, it is necessary to promote the so-called fiscal morality, that is, to settle even small things with a receipt. For this, however, you need the so-called social capital based on mutual social relations and the trust of individuals who, thanks to it, can obtain more benefits (from an economic and social point of view). In countries with high social capital, the extent of fraud and tax evasion is very low.
Introduction of electronic invoices
The pursuit of the fight against fraud and the limitation of the VAT gap will also require new sealing measures, announced by the Ministry of Finance. The most important future changes to VAT include a new extension of the catalog of entities obliged to use online cash registers and the project to introduce structured invoices, that is, electronic invoices, which will be issued. using the national electronic invoicing system managed by the tax administration. .
In August of this year. The Council of Ministers adopted the draft amendments to the VAT law implementing the national system of electronic invoices.
“The Ministry of Finance wants to test the new solution with businesses from October 2021, so that as many businesses as possible can fully use electronic invoices in 2022.” – announced in the press release.
The Ministry informed that in the first phase of the implementation of the electronic invoice, Polish entrepreneurs will be able to use it voluntarily. It will form part of the approved sales documents, alongside the paper invoices and electronic invoices already present in the economic turnover. In 2023, the use of electronic invoices will become mandatory.
“The introduction of electronic invoices is another example of the digitization of tax services. It will bring two very positive effects for the Polish economy. First of all, it will considerably facilitate the settlement of exchanges between entrepreneurs. Second, it will speed up the detection of attempted tax evasion, thereby increasing the security of honest businesses and serving to further narrow the VAT gap. ” – said the Deputy Minister of Finance, quoted in the press release Jan Sarnowski.
“Falls down a lot. Writer. Passionate alcohol maven. Future teen idol. Hardcore music practitioner. Food fanatic. Devoted travel fan.”