Our key finding from this year’s European survey is that, in the context of VAT, taxpayer behaviour appears to be driven by the approach of the tax authorities. 

In some countries, for example Germany and Italy, the tax authorities take a robust and challenging approach to VAT compliance. It is perhaps as a result of this approach that taxpayers in those countries give more focus to ensuring that VAT is managed effectively in their businesses.

Conversely, despite the UK tax authorities’ talk of using penalties and similar enforcement measures to drive taxpayer behaviour, if a UK business does not attach the same significance to its VAT compliance as European businesses might do, they appear to be less likely at present to face significant pressure from the UK tax authorities to do so. So it appears that, in many cases, only a conscientious UK business or a UK business which has significant VAT errors in the past appears to dedicate significant resources towards managing its VAT compliance effectively.

It remains to be seen whether the European trend towards real-time digital reporting in relation to VAT will lead to an increased focus on VAT by other European businesses

It will also be interesting to see the extent to which Brexit impacts the approach to VAT that is adopted in future by European businesses.

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