“Electronic sales suppression” techniques facilitate tax evasion and result in massive
tax loss globally. Point of sales systems (POS) in the retail sector are a key component in
comprehensive sales and accounting systems and are relied on as effective business
accounting tools for managing the enterprise. Consequently, they are expected to contain
the original data which tax auditors can inspect. In reality such systems not only permit
“skimming” of cash receipts just as much as manual systems like a cash box, but once
equipped with electronic sales suppression software, they facilitate far more elaborate
frauds because of their ability to reconstitute records to match the skimming activity.
Tax administrations are losing billions of dollars/ euros through unreported sales and
income hidden by the use of these techniques. A Canadian restaurant association
estimates sales suppression in Canadian restaurants at some CAD 2.4 billion in one year.
Since the OECD’s Task Force on Tax Crimes and Other Crimes (TFTC) began to work
on and to spread awareness of this phenomenon a number of countries (including France,
Ireland, Norway and the United Kingdom) have tested their retail sector and found
significant problems. Among these countries, Ireland has moved quickly to put in place
legislation to help tackle such abuse. Tackling this issue aggressively is seen by a number
of countries as an important ingredient of a strategy to reduce their overall tax gap.
This report describes the functions of POS systems and the specific risk areas. It sets
out in detail the electronic sales suppression techniques that have been uncovered by
experts, in particular “Phantomware” and “Zappers”, and shows how such methods can
be detected by tax auditors and investigators. It notes the constant development of
electronic suppression techniques and the need to be alert to changes.
The report compiles and analyses the range of government responses that are being
used to tackle the abuse created by electronic sales suppression and identifies some best
practices. These include strengthening compliance with a focus on voluntary compliance
through industry bodies, raising awareness with all stakeholders including the public,
improving audit and investigation skills, developing and sharing intelligence and the use
of technical solutions such as certified POS systems.more
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tax loss globally. Point of sales systems (POS) in the retail sector are a key component in
comprehensive sales and accounting systems and are relied on as effective business
accounting tools for managing the enterprise. Consequently, they are expected to contain
the original data which tax auditors can inspect. In reality such systems not only permit
“skimming” of cash receipts just as much as manual systems like a cash box, but once
equipped with electronic sales suppression software, they facilitate far more elaborate
frauds because of their ability to reconstitute records to match the skimming activity.
Tax administrations are losing billions of dollars/ euros through unreported sales and
income hidden by the use of these techniques. A Canadian restaurant association
estimates sales suppression in Canadian restaurants at some CAD 2.4 billion in one year.
Since the OECD’s Task Force on Tax Crimes and Other Crimes (TFTC) began to work
on and to spread awareness of this phenomenon a number of countries (including France,
Ireland, Norway and the United Kingdom) have tested their retail sector and found
significant problems. Among these countries, Ireland has moved quickly to put in place
legislation to help tackle such abuse. Tackling this issue aggressively is seen by a number
of countries as an important ingredient of a strategy to reduce their overall tax gap.
This report describes the functions of POS systems and the specific risk areas. It sets
out in detail the electronic sales suppression techniques that have been uncovered by
experts, in particular “Phantomware” and “Zappers”, and shows how such methods can
be detected by tax auditors and investigators. It notes the constant development of
electronic suppression techniques and the need to be alert to changes.
The report compiles and analyses the range of government responses that are being
used to tackle the abuse created by electronic sales suppression and identifies some best
practices. These include strengthening compliance with a focus on voluntary compliance
through industry bodies, raising awareness with all stakeholders including the public,
improving audit and investigation skills, developing and sharing intelligence and the use
of technical solutions such as certified POS systems.more
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