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Black Swans: Recapitulative Statements/VIES (VAT) & Use Tax Reciprocity (RST)

25 Pages Posted: 23 Feb 2012 Last revised: 24 Jul 2012

Richard Thompson Ainsworth

NYU - Graduate Tax Program; Boston University - School of Law

Date Written: February 22, 2012


There is fundamentally no difference between a value added tax (VAT), and a retail sales tax (RST) when it comes to collecting the tax on cross-border sales. If (under a VAT) a seller is allowed to “zero-rate” cross-border sales, or if (under a RST) a seller is exempt from collecting the tax on cross-border sales, the critical enforcement question is exactly the same – how does the system assure that the buyer will self-assess (and pay) the tax?

The simple answer is that the tax administration audits. The more complicated answer notes that the effectiveness of the audit (by the destination jurisdiction) depends heavily on its ability to secure transactional data from the origin jurisdiction. Without a good information exchange mechanism this audit is difficult.

The EU’s data-sharing mechanism involves recapitulative statements by origin state sellers and a VAT Information Exchange System (VIES) that shares this information with the destination state. There is a technology-intensive proposal to do the same among the US states, the Use Tax Reciprocity (UTR) system.

The EU’s recapitulative statement/VIES network is a classic Black Swan, a program characterized by extraordinary cost overruns, extreme schedule delays, and dramatic shortfalls in realized benefits. Black Swans have an average cost overrun of 200%, and an average schedule overrun of 70%. The UTR has the same problems.

Program management professionals from the Harvard, Berkeley and Oxford business schools would suggest that the UTR promoters suffer from “Black Swan blindness.” They need to ask if this major IT project: (1) Can absorb the hit if the project goes over budget by 400%? (2) Can survive if only 25% to 50% of the projected benefits are realized? (3) Can take the hit if 15% of the medium-sized IT projects (secondary projects related to the main project) are also over budget by 200%? Many of the URT’s difficulties can be identified through a “reference class forecasting” study.

Keywords: Black Swan, VIES, Recapitulative statements, Use Tax, SST, Streamlined Sales Tax Governing Board, UTR, Use Tax Reciprocity, Reference class forecasting

JEL Classification: K19, K34

Suggested Citation

Ainsworth, Richard Thompson, Black Swans: Recapitulative Statements/VIES (VAT) & Use Tax Reciprocity (RST) (February 22, 2012). 66 Tax Notes International 275 (April 16, 2012); Boston Univ. School of Law, Law and Economics Research Paper No. 12-10. Available at SSRN: or

Richard Thompson Ainsworth (Contact Author)

NYU - Graduate Tax Program ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

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