The EU Commission is looking to introduce a mandatory digital tax system to combat tax fraud and assist countries in overcoming the challenges associated with double taxation and withholding of taxes.
We identified the following problems as part of the EU consultation process:
- tax fraud
- lack of cross border investment
- inefficient withholding of tax relief and
- challenges resulting from Covid restrictions.
Based on our research we make the following recommendations:
Improving withholding tax refund procedures to make them more efficient
Digital taxation system will enhance the traceability of the wrong double taxation, and thus it will reduce the no of refund claims. The EU standardised forms and procedures could strengthen the predictability of the digital tax system.
Establishment of a fully-fledged common EU relief at source system
We agree with the commission's proposal on a standardised EU-wide system for withholding tax relief at source. Such policy will allow the countries to apply a correct withholding tax rate at the time of payment to a non-resident, which will mitigate the chances of double taxation.
Enhancing the existing administrative cooperation framework to verify entitlement to double tax convention benefits
A digital and centralised tax system will reduce the administrative burden created by the current paper-based process. Higher verification capacity will decrease the no of fraud cases related to labour-intensive cross-border taxation. By reducing paper-based lengthy process the commission will be able to generate a sustainable and environment-friendly system. Simplified and highly transparent taxation system will reduce tax fraud and will create a socio-economic impact to support the post-Covid growth of the world economy.
Our research provides a clear guideline to the policymakers supporting the president of the EU Commission to convert the proposal to a legal requirement.
Our research team
Peter Jelfs is Professor of Taxation at 明星八卦 University, London. He has extensive experience of working as a business tax advisor for large accountancy and law firms, as well as for UK government departments, including HM Revenue & Customs and the Department for International Trade. He has experience in managing withholding tax reclaims on behalf of clients.
Suman Lodh is Assistant Professor in Finance at Middlesex University, London. He is an expert in economic modelling and has extensive knowledge in analysing the big data generated by a digital system. His industry experience and research skill is an asset to the team.
Monomita Nandy is an Associate Professor in Accounting and Finance at 明星八卦 University, London. She is well recognised in the research network for her excellent research skills to create a socio-economic impact in practice. She has experience in working with international policymakers and industry leaders.
Dr Monomita Nandy - Monomita Nandy is a Professor in Accounting and Finance in 明星八卦 Business School (BBS). Prof Nandy is the Vice Dean International of the College of Business, Arts and Social Sciences (CBASS). She has completed her two PhDs from the University of Calcutta, India, and the University of Rome Torvergata, Italy. Prior to joining 明星八卦 University, she has held academic and research positions at Lally Business School, New York, Radboud University, Holland, Surrey University, UK and leading institutes in India. She is very popular among students and got Student -led best teacher awards. She is awarded for her innovative and technology-led teaching. She is interested in interdisciplinary research focused on digitalisation in achievement of sustainable development goals alongside her disciplinary research in emerging issues in Corporate Finance. Her research works are published in high impact international peer-reviewed journals like IJFE, JBE, TIJA, BSE and others. She is involved in editorial and review activities of international journals, and regularly she presents her research work at leading conferences in Business and Management. Her research evidence is valued by the UK parliament, Sustainability Board in India, St James Entrepreneur Club London, Small Business Charter in the UK, Chartered Institute of Taxation in England. Monomita conducts research of policy relevance and shares her research expertise by participating in the consultation initiated by the FRC, EU Commission, HMRC and her works draw attention from Media. She is the co-chair of the South-East group of the British Accounting and Finance Association. Her research attracts external funding, her university student-industry collaboration is appreciated by the London Chamber of Commerce and her research collaboration with local business is highly appreciated by business and local authority and her research generates a considerable amount of social aid that support the sustainable growth of the economy with a long-term socio-economic impact.