AU2017100371A4 - Method and system for collection of gst/vat from cross-border or offshore online transactions - Google Patents

Abstract

METHOD AND SYSTEM FOR COLLECTION OF GST/VAT FROM CROSS-BORDER OR OFFSHORE ONLINE TRANSACTIONS Abstract A major premise of the Goods and Services Tax (GST) or Value-Added Tax (VAT) system is that the tax is to be assessed and collected by suppliers on a transaction basis ("vendor collection model") with ex post audits by the tax administration. The vendor collection model proved fit for purpose in the 2 0 th century economy dominated by domestic transactions between parties that physically interacted with each other at an identifiable geographic location. However, the development of the Digital Economy in the 2 1 st century (which offers the possibility of commercial interactions with one or many - not always identifiable - parties, unconstrained by time, space and borders) has undermined the capacity of suppliers and of tax administrations to ensure an effective and efficient collection of the tax and also has created competitive distortions between local and offshore suppliers. Against this background, this invention relates to a method to collect GST/VAT from all offshore online transactions/payments, via a secure VAT gateway that funnels transaction data from any point originating at any layer of the transaction-value chain, including but not limited to digital or electronic checkouts, banks and financial intermediaries, to a secure government portal. Using the government portal, the customer can pay the tax incurred on any offshore online transaction, where a tax percentage (GST/VAT) is automatically added on any offshore transaction data based on the tax jurisdiction where the costumer resides. Based on customer collection model, the technology-enabled method for the collection of GST/VAT on offshore online supplies, where transaction or payments data is funneled to a secure government portal would significantly outperform the traditional vendor collection model, both for business to business (B2B) and business to consumer (B2C) supplies. Drawings Government portal (103) VAT/GST (109) Offshore transaction data (108) Banks (102) Banks (102) cuReceiver( 01) Product (104)Supir(15 Tax Jurisdiction A (106) Tax Jurisdidion B (107) Figure 1

Description

Technical field 2017100371 02 Apr 2017 [0001] The present invention relates to a method of collecting GST/VAT from all offshore online transactions/payments, via a secure VAT gateway that funnels transaction data from any point originating at any layer of the transaction-value chain, including but not limited to digital or electronic checkouts, banks and financial intermediaries, to a secure government portal. Embodiments of the invention are designed to improve GST/VAT compliance via split payments, which is an anti-GST/VAT fraud measure where the receiver of goods (or customer) residing in any given tax jurisdiction, pay GST/VAT directly to the tax authorities rather than the vendor.

Background of the invention [0002] The 21st century economy has largely become global and digital. A fast-growing portion of overall taxable consumption is now effected via online supplies. The international taxation framework, as agreed by the Organisation for Economic Cooperation and Development (OECD) nations maintains that VAT should ideally be levied in the jurisdiction of presumed consumption: "at destination". The reason is that such an allocation of taxing rights avoids distortions of competition among suppliers from different jurisdictions, as the same VAT burden will apply in the domestic marketplace irrespective of the location of the supplier. This is particularly crucial for online supplies that are fully remotely delivered and for which the location of the supplier is therefore not important.

[0003] Due to the rise in cross-border or offshore purchases from online stores, it is very challenging to abide by the destination principle. It is rather impossible for suppliers to collect tax, on behalf of a tax jurisdiction and then remit the tax back to the country of consumption. It is difficult for a tax jurisdiction (consumption country) to enforce its GST/VAT rules at the origin of the supply chain (origin country). The vendor collection model, which was designed in 20th century, where a vendor collects the tax and remits it back to the tax jurisdiction has worked under domestic trade settings, however it poses serious challenges when it comes to cross-border trade. Besides, enforcing vendor collection adds compliance costs to the day-to-day business of an offshore online vendor, 2 which hampers the growth of the vendors. Furthermore, the potential for fraud and international double taxation or unintentional non-taxation should also be minimised (effectiveness principle). 2017100371 02 Apr 2017 [0004] Enforcement limitations therefore also potentially result in competition distortions between online suppliers depending on their origin (lack of neutrality). Moreover, in case of cross-border purchases, tax administrations will also face difficulties in identifying Internet users' country of consumption if a product is shopped online. Nevertheless, tax enforcement difficulties in general, and in the Digital Economy in particular, are a major source of concern, as the VAT gap between expected revenue and revenue actually collected is estimated at EUR 160 billion, while cross-border fraud alone accounts for EUR 50 billion of revenue loss each year casting doubts over the effectiveness of the mutual assistance instruments.

[0005] The VAT system as currently stands, ranks poorly against the traditional benchmarks of a "good tax system" in the context of the 21st century digital economy. In order to address these challenges, an innovative solution for governments to collect GST/VAT from online offshore purchases assisting in levelling the retail playing field and disrupting the way GST/VAT is collected is described 1. The method establishes a digital link between: the customer, government, banks and online retailers. Offshore transaction data flows seamlessly between the banks and a secure government portal, both located in the same tax jurisdiction. Based on a self-assessment model, tax is paid by consumers residing in a given tax jurisdiction via the secure government portal.

Summary of the invention [0007] The present invention describes a novel solution to collect GST or VAT from offshore transactions, where customers residing in one tax jurisdiction order products online from suppliers located in different tax jurisdiction. The invention simplifies the collection of tax in order to level the playing field for local retail and businesses that pay their GST/VAT to the government.

[0008] The embodiments of the invention are designed to funnel or route offshore 3 transaction data from banks or any financial intermediaries to a secure government portal, where customers can log in and pay their GST or VAT incurred on the offshore transaction. The onus is on the customers, who reside in a tax jurisdiction where the products (tangible or intangible) bought online is consumed, to pay their GST/VAT. 2017100371 02 Apr 2017 [0009] In a particular preferred embodiment, the invention outlines a method to issue a unique code to citizens residing in a given tax jurisdiction. The method involves the generation of a standardized unique 16 digit, or any combination of alphabets and numbers, GST/VAT identifier. This standardized gateway allocates unique codes to citizens based on their country of residence. In one aspect of the embodiment, the gateway is hosted digitally and electronically, over a network, in one location or several locations and governments have access to issue GST/VAT identifiers for their citizens using electronic data exchange, over a secure network, between the government and the gateway.

[0010] In a particular preferred embodiment, customers or citizens residing in any given tax jurisdiction will register online through a government portal and get their unique GST/VAT identifier, issued or generated by the gateway. Based on the country of residence and percentage tax on products and services, a GST/VAT percentage is associated or linked with the GST/VAT identifier.

[0011] In another preferred embodiment, the unique GST/VAT identifier is paired digitally or linked with a bank or any financial intermediary in order to funnel or route offshore transaction data from any point originating at any layer of the transaction-value chain, including but not limited to digital or electronic checkouts, banks and financial intermediaries, to a secure government portal. The government portal issuing the GST/VAT identifier will be in a similar tax jurisdiction to that of the bank i.e. the bank and the government portal are co-located in each taxjurisdiction.

[0012] In one particular preferred embodiment, a computer program identifies or captures offshore transaction data within a bank account and its associated electronics funds transfer system and funnels or transfer the data further into the government portal. The GST/VAT incurred on all offshore online transactions gets automatically calculated based on the country of residence or tax jurisdiction. The onus is on the customer to pay the tax through the government portal. 2017100371 02 Apr 2017 [0013] In one embodiment, the customer residing in one jurisdiction will have the capability to upload or attach, over a computer network, an invoice of the offshore transaction in the government portal if the product purchased online was not consumed in the given tax jurisdiction but rather delivered to a different jurisdiction for example a gift. In this aspect of the embodiment, a computer program identifies the delivery address on the invoice and matches with the tax jurisdiction of the customer who purchased the product online. If the delivery address is different to the location of the customer, then a null value or zero GST/VAT on that particular transaction is added. Similarly, if the product (tangible or intangible) is purchased physically using the bank card in an offshore location and where the product was not consumed in the tax jurisdiction of the issuing bank, a provision of attaching invoice on those offshore transactions with a null GST/VAT value will be part of the embodiment.

[0014] In one particular and preferred embodiment, a computer program will identify the offshore suppliers or vendors details when a transaction occurs from a customer's bank in one tax jurisdiction and the supplier's bank in another. A suppliers' profile database will contain information on the total amount of trade from any given offshore supplier to a country where their products or services are being consumed, based on the number of transactions occurring from banks. This information will accurately quantify tax erosion and profit shifting from big offshore corporations and governments can enforce compliance on GST/VAT remittance based on the information via the government portal.

Brief description of the drawings [0015] Preferred embodiments of the invention are describe with reference to the accompanying drawings, wherein; [0016] Figure 1 illustrates an overall flow of an offshore transaction between two banks, where a customer or receiver residing in one tax jurisdiction, receives product or a service from a supplier in a different tax jurisdiction.

[0017] Figure 2 illustrates how an offshore transaction data from banks or any financial intermediaries is split and funneled or routed to a secure government portal. 2017100371 02 Apr 2017 [0018] Figure 3 illustrates the method of generating standardized unique 16 digit, or any combination of alphabets and numbers, GST/VAT identifier via a VAT gateway.

[0019] Figure 4 illustrates the process of GST/VAT identifier paired digitally or linked with a bank or any financial intermediary in order to funnel or route offshore transaction data from any point originating at any layer of the transaction-value chain to the government portal.

[0020] Figure 5 illustrates the computer program that identifies and captures offshore transaction data from the bank to the government portal.

[0021] Figure 6 illustrates a flow chart where a customer residing in one tax jurisdiction orders a product online and get it delivered in a different tax jurisdiction.

[0022] Figure 7 illustrates the overall process of collecting data and information about the amount of trade from any given offshore supplier to a country where their products or services are being consumed, based on the number of transactions occurring from banks of customers located in the country of consumption.

Detailed description of the preferred embodiments [0023] Figure 1 illustrates an overall flow of the system, within which the present invention may be embodied. The receiver or customer 101, who resides in tax jurisdiction A 106 orders products 104 online from a supplier 105, who is located in tax jurisdiction B 107. The customer's 101 bank 102 transfer the funds to the supplier's bank. The offshore transaction data 108 from the customer's bank 102 is captured and a VAT/GST split 109 on the transaction is automatically transferred to a government portal 103.

[0024] Turning now to Figure 2 it is shown how the offshore transaction data 108 is split 6 into the transaction value or the amount m, which is already paid by the customer 101 at the time of ordering the product online and a GST/VAT percentage no incurred on the offshore transaction, when purchasing the product 104. The GST/VAT 109 is then paid separately by the customer or the receiver of the goods 101 on the government portal 103. 2017100371 02 Apr 2017 [0025] Turning to Figure 3, the method by which a unique GST/VAT identifier 114 gets generated by a VAT gateway 112 for any government in the world is demonstrated. The method involves the generation of a unique alphanumeric code 114, which can be any number of digits but preferably 16 through a VAT gateway 112. The VAT gateway 112 has an electronic or a digital interface that facilitates in exchanging data to and fro 113. A government in tax jurisdiction A 106 can request for its citizens the GST/VAT identifiers 114 by placing an electronic request via the electronic data exchange 113 to the VAT gateway 112. The VAT gateway then issues the unique GST/VAT identifiers to customers based in their country of residence or tax jurisdiction or where they will consume a product or a service. Based the jurisdictions' tax rules a GST/VAT percentage 110 is automatically linked with the GST/VAT identifier.

[0026] Turning to Figure 4, the unique GST/VAT identifier 114 is paired digitally or linked with a bank 102 or any financial intermediary to funnel or route offshore transaction data 108 from any point originating at any layer of the transaction-value chain to a secure government portal.

[0027] Figure 5 illustrates the computer program 115 that identifies or captures offshore transaction data 108 within a bank account and its associated electronics funds transfer system and funnels or transfer the data further into the government portal. The computer program 115 interacts with the bank via an electronic data exchange 113 or a digital interface over a computer or internet network. The computer program searches offshore transactions and transaction fees that the bank collects when remitting funds to an offshore bank. The offshore transaction data is then transferred to the government portal 103 via an electronic data exchange 113. The GST/VAT incurred on all offshore online transactions gets automatically calculated based on the country of residence or tax jurisdiction. The onus is on the customer to pay the tax through the government portal. 7 2017100371 02 Apr 2017 [0028] Figure 6 illustrates a decision or logic flow when the customer buys a product online but gets it delivered to a different tax jurisdiction 116. If the product 104 purchased online was not consumed in the given tax jurisdiction but rather delivered to a different jurisdiction for example a gift then the buyer or the customer has to attach an invoice 117 of that transaction detailing the proof of delivery. When the computer program verifies the address of delivery 118, the GST/VAT incurred on that transaction is a null value or zero, as the product or service was not being consumed in the country where they were ordered from.

[0029] Turning now to Figure 7, it is shown how offshore transaction data will facilitate the quantification of multinational corporate tax evasion. In one and preferred embodiment, a computer program will identify the offshore suppliers or vendors details 105 when a transaction occurs from a customer's bank in one tax jurisdiction 106 and the supplier's bank in another 107. A suppliers' profile database will contain information on the total amount of trade from any given offshore supplier to a country where their products or services are being consumed, based on the number of transactions occurring from banks 102. This information will accurately quantify offshore suppliers' transaction details 121 and tax erosion and profit shifting 122 from big offshore corporations and governments can enforce compliance on GST/VAT remittance based on the information via the government portal 103. 1 1 8

Claims (5)

1. The claims defining the invention are as follows:

   1. A program or a procedure that operates over a computer network that issues unique alphanumeric GST/VAT identifiers, preferably 16 digits, to citizens of any tax jurisdiction or based on any customers' country of residence through a standardized VAT gateway that has a digital interface and that exchanges electronic data between the VAT gateway and the government portal and that is hosted electronically on one computer or a network of several computers.
2. 2. A program or a procedure that operates over a computer network as claimed in claim 1 or any banking transaction network or any electronic transaction network that digitally links or pairs or associates the unique GST/VAT identifier with a bank account or and its associated electronics funds transfer system i.e. a credit or a debit card or any financial intermediary through a secure government portal, wherein the government portal and banks are located in a similartaxjurisdiction.
3. 3. A program or a procedure that operates over a computer network or any banking transaction network or any electronic transaction network as claimed in claim 1 and claim 2 that identifies, captures and channels or routes offshore transaction data or any offshore transaction information within a bank account and its associated electronics funds transfer system i.e. a credit or a debit card to a secure government portal, wherein the rate of taxation or GST/VAT percentage is automatically added on any offshore or foreign transaction data.
4. 4. A program or a procedure that operates over a computer network or any banking transaction network or any electronic transaction network as claimed in claim 1, claim 2 and claim 3 that identifies the location of the delivery of the product or services in order to identify the correct rate of taxation, GST/VAT, and that has the provision to associate invoices with every foreign transaction data.
5. 5. A program or a procedure that operates over a computer network or any banking transaction network or any electronic transaction network as claimed in claim 1, claim 2, claim 3 and claim 4 that analyses the plurality of information from all offshore suppliers or vendors supplying products and services to any given tax jurisdiction wherein the collated offshore transactions data quantifies the amount of trade from any given offshore supplier to a country where their products or services are being consumed, based on the number of transactions occurring from banks in order to prevent corporate tax evasion.