APPROACH TO VALUE ADDED TAX ADMINISTRATION

Abstract

The author highlights an approach to VAT administration that would eliminate the main drawback of the existing system – the possibility of budget reimbursement without first receiving funds to the budget organization's account. The essence of the approach is the need to transfer calculations from the level of reports to the level of cash. The business entity – the seller, when receiving income, accrues a tax liability (as it happens in the current system). The seller (as in the current system) pays the tax liability to the budget over a certain period of time. However, if the income is received from a registered VAT payer, when paying the liability, the seller indicates that this tax is directed to be reimbursed in favor of the VAT-paying buyer. The budgetary organization, having received tax funds for payment with a note in favor of the registered VAT payer, transfers this amount to such a buyer within a few days from the moment of receipt. The income that the seller receives from non-registered VAT payers is considered a sale to the final consumer. The tax on such income remains at the disposal of the state. The implementation of the proposed approach does not require a fundamental change of the VAT system in Ukraine, it only requires getting rid of its unnecessary attributes. The author considers possible threats when applying the approach: a long chain of calculations; a significant number of payment orders, transfers; a shorter term for budgetary compensation; reduction of receipts, if the majority of subjects register as VAT payers. The result is the presentation of the proposed approach, its advantages over the current system – in particular, the impossibility of budget reimbursement without prior receipt of funds by the budget organization, the reduction of VAT administration, the removal of tension in the issues of budget reimbursement, the approximation of VAT to the scientifically based essence of this tax, the reduction of the volume of reporting and the possibility for abuse.