How To Leverage DAC7 Data In 5 Steps

Executive Summary

The EU Directive on Administrative Cooperation in the field of taxation (DAC7) came into effect on January 1, 2023. The first reporting under DAC7 needs to happen by January 31, 2024, (for data from 2023) and now is the best time for Tax Administration agencies to prepare for that. With the right approach and technology, implementing DAC7 regulations can run seamlessly and empower Tax Authorities to detect taxpayers that avoid paying taxes and identify money laundering schemes more efficiently than ever. And thanks to that - guarantee additional tax revenue in the national budget. To achieve those benefits, tax units have to do their homework first. New data, new rules, and new formats are new pieces of knowledge that generate challenges that have to be addressed. These challenges include: connection with new data sources, identifying matches, 360 view of each taxpayer, creating new rules, schemas, updating scoring and alerting processes, and last but not least, being prepared for all new regulation yet to come such as DAC8. By cooperating with the tax authorities community, we have identified the five most impactful steps to administer DAC 7 to fight tax evasion and money laundering.

Prepare your system for a new data source. The reporting schema for DAC7 with all the rules and guidelines for reporting is already defined by OECD and ready to use. Integrate new data with your existing system. The ultimate goal is to create a complete 360 profiles of reportable sellers from online platforms and match them with taxpayers.
Enhance existing rules, models and scores. Find individual sellers avoiding paying tax or clusters of sellers doing many micro transactions.
Consume The Results With A Single Pane Of Glass. With all taxpayers data pulled together with their analytical context, analysts have a self-explainable picture describing tax payers indicated to be checked.
Practice continuous improvement and adapt smoothly to changes. Constantly reduce the number of false positives and choose a system with great flexibility for onboarding new xml formats, new rules, and new data portions.

Each of these items is discussed in detail below.