Key Features of the Online Fiscal System

By?Anatoly Gaverdovsky, Chairperson?and Founder, Digital Tax Technologies

Online Fiscal System

Implementation of online fiscalization?[1]?projects is a complex and challenging task, because they affect not only a considerable number of retail taxpayers but also their buyers—citizens of the country. Consequently, governments should entail complex efforts to achieve the project’s objectives, including reducing the share of the shadow economy and increasing a tax collections.

There is one simple fact: to deceive the system and not transfer data to the tax authorities, seller do not need to be a hacker. All he needs is just not to issue a fiscal receipt or simply not use a cash register.

Therefore, the creation of one centralized system for collecting fiscal data without proper enforcement on issuing valid fiscal receipts does not bring the desired impact. Instead, it may cause an additional burden for bona fide taxpayers who meet the requirements of the law.

The Structure of the Online Fiscal System

The online fiscal system is a complex organizational and technical initiative, which comprises the following key elements:

• Online cash registers registration and de-registration system. Allows to associate the taxpayer with the cash register device or software program that he uses to register sales and set the business address and other details. The address can be either the geographic location of the cash register installation, or an internet address for e-commerce businesses. Other details may specify the tax regime, excisable trade, betting activities and other parameters that are important for tax administration.
• A centralized system for receiving and storing fiscal data.
• Analytical system?for calculating revenue aggregates based on the fiscal data.
• Public control system?that allows citizens to use a mobile application for fiscal receipts verification and filing a complaints if retailer fails to issue a valid receipt. That application may also support integration and data exchange with popular e-commerce and financial platforms in the country, e.g., to provide a consumer with access to cashback, discounts and other incentives in exchange for registration and sharing of receipts’ data.
• The field management system for the territorial tax inspectors. It helps to find, map and describe all existing retail businesses in the territory to build an actual retail registry. Then it can be verified against the registration data of retail taxpayers and cash registers.
• Internet search system to monitor online presence and activities of retail taxpayers. Any business needs customers and most likely will advertise on the Internet. Performing an active search for such activities allows to collect additional data on the retail taxpayers who should use a cash registers.
• Electronic communication system to interact with the taxpayers. A substantial number of retail taxpayers to control usually results in a sizable number of tax violations. Thus, to build a scalable control system, it is necessary to digitize all communications with the taxpayers. It will also eliminate dependencies on the human factors and exempts tax inspectors from the mundane activities.

The Role of the Public Control

It is important to understand that the buyer’s motivation to demand a valid fiscal receipt is the basis for the success of the online fiscalization project. Otherwise, it is easy to deceive the tax administration system just by not issuing a fiscal receipt.

For the expensive and complex products and services the product return and warranty policies already support buyer’s motivation to ask for a receipt. Any others will require implementation of additional incentives, for example, if the person registers receipts in the tax application:

• Unconditional tax deduction for all fiscal receipts. As an example, a 1% deduction on a purchase can be a significant reason for the shoppers to demand receipts for all kinds of goods.
• Additional deduction for a certain categories of goods and services, such as medicines or education.
• Participation in the state and private lotteries for the buyers.
• Access to the third-party loyalty programs, cashback and discounts.

Tax administration platform will provide an open API for connecting third-party applications from the tax ecosystem members. Submitting receipt by authenticated tax application user confirms the purchase. Ecosystem participants may use this data with consumer consent to provide personalized cashback, promotions, prizes and other mechanics, which will drive consumers’ demand.

In addition, buyers can provide a tax administrations with the feedback on the retailers’ activities. Like a non-use of cash registers or failing to present a fiscal receipt.

[1]?Fiscalization?— is fiscal law designed to avoid retailer fraud. Fiscal law about cash registers has been introduced in countries to control the grey economy by enforcing all mandatory transaction reporting to the authorities. According to fiscal law, an appropriate fiscal receipt must be printed and given to the customer. Source: Definitions.net, URL:?https://www.definitions.net/definition/fiscalization.

Online fiscalization?requires the fiscal data must be submitted to the tax administration either in the real time or within predefined timeframe, e.g., during 24h window.

To learn more about digital tax administration approaches, solutions and best practices, please visit our site at?www.taxtech.digital