Operational Research and the Control of Value Added Tax

Abstract

This case study in Value Added Tax (VAT) is concerned with organising the activities of some 4000 staff in safeguarding the £billions of tax revenue paid by 1¼ million registered traders. VAT control is achieved principally at traders' premises by a system of verifications to ensure that the traders' tax returns are correct and that their tax accounts are adequate. The scale of the operation can be appreciated from the fact that annually over 300,000 visits are made, resulting in the recovery of more than £100 million of under-declared tax. The project consisted of systematically collecting and analysing data pertaining to the visits made to traders and re-allocating control resources according to factors which were found to relate strongly to the tax behaviour of groups of traders. Keeping the techniques simple allowed management to play a full part in the research and led to the ready implementation of the results.