Value added tax (VAT) is an inflow of money about two and a half times larger than income tax. The fight against fraud must be accelerated, franceinfo learned on Tuesday from a government source.
The government wants to force companies to link their accounting systems to those of the tax administration in order to set up a sort of withholding tax companies. The fight against VAT fraud will be accelerated, franceinfo learned on Tuesday April 18 from a government source. Electronic invoicing will be developed and will cover small businesses by 2026.
1 How much does the VAT yield per year?
Value Added Tax (VAT) is the tax that brings in the most money for the state, around two and a half times more than income tax. According to the latest figures available, VAT brought in 186 billion euros in 2021. This sum is used to finance public services, but not only: in recent years, a significant part of VAT revenue has been directed to the bodies of social protection and local authorities.
2 How is VAT collected?
Unlike income tax, VAT is not collected by the state. It is the companies and merchants who take care of this with the customers. For example, when you checkout to buy a $100 item of clothing, not all of that money comes back to the store. The latter keeps 80 euros in his cash box, then pays the 20 euros to the State, which corresponds to the usual 20% VAT, even if there are reduced rates (at 10 or 5.5%) on certain products or services for example for catering or food products.
But this scheme is not always respected because there are many VAT frauds. The payment of small sums in cash, for example, passes under the radar of the State and can thus escape VAT.
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These frauds can take on much larger dimensions. There is, for example, the “carousel” fraud. It consists, for a company, in issuing false invoices in order to then recover the VAT from the State. Online commerce also weighs, in particular because of foreign companies, outside the European Union, which sell on platforms, such as Amazon or Ebay, without ever collecting VAT.
3 What is the cost of fraud each year?
According to INSEE’s estimate, VAT fraud would be between 20 and 25 billion euros per year. The tax administration still carries out checks: in 2021, nearly 900 million were recovered after tax checks, just over a billion in 2019. This remains relatively modest according to the conclusions of a Senate report published in 2022, which highlighted in particular the difficulty in detecting VAT fraud.