EXPOSED: The “highway robbery” of Germany’s interest regime
03 February 2012
Salman Shaheen - ITR
Taxpayers are angry over Germany’s unfair enforcement of interest on old VAT errors even when there has never been any loss to the exchequer. International Tax Review investigates.
Businesses agree the tax authorities are justified in charging interest in the case of mistakes where there is a real cash advantage for the business which leave the exchequer out of pocket. This can occur where, in error, no VAT is shown on an invoice where the recipient of the invoice is not entitled to a reimbursement of input VAT.
The problem, however, is where VAT is erroneously not shown on the invoice although the transaction is taxable or erroneously shown on the invoice despite not being taxable and where in both cases the recipient is entitled to the full deduction of input VAT.
“In these cases, if one looks at all three parties involved, there occurs neither an advantage in cash flows for the business that issues the invoice and the business that receives the invoice, nor a disadvantage for the exchequer compared with the situation that the business...
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