Electronic sales suppression, also known as “zapper” or “phantomware,” is a form of tax evasion that involves manipulating electronic records to underreport or delete sales transactions. This fraudulent practice has become more prevalent in recent years, prompting governments and tax authorities to crack down on businesses that engage in such activities. In this article, we will explore some of the latest cases and penalties related to electronic sales suppression.
In August 2021, the US Department of Justice (DOJ) announced the sentencing of a Texas-based software developer because of his role in designing and selling a “zapper” software that enabled businesses to delete cash transactions and underreport their sales. As a result, the DOJ sentenced the developer to 48 months in federal prison and ordered to pay over $3 million in restitution to the Internal Revenue Service (IRS).
Sales suppression regulations around the world
In Canada, the local authorities fined a restaurant owner with $250,000 and sentenced him to two years in jail for using an electronic sales suppression device to evade taxes. The restaurant owner used the device to delete and manipulate sales records, resulting in the underreporting of over $1 million in sales. The case marked the first time that an individual had been sentenced to jail for using such a device in Canada.
In Australia, the government has been cracking down also on businesses that use electronic sales suppression devices, which are estimated to cost the country over $3 billion in lost revenue each year. In a recent case, the government fined a Melbourne-based restaurant owner with over $200,000 for using an illegal software to delete sales transactions and evade taxes. The Australian Taxation Office (ATO) discovered the software during a routine audit, which has been using sophisticated data-matching techniques to detect and investigate instances of electronic sales suppression.
In Europe, several countries have implemented measures to combat electronic sales suppression, including the use of certified cash registers and other anti-fraud technologies. In Italy, a recent study estimated that this fact costs the government over 35 billion euros in lost tax revenue each year. The government has responded by introducing a range of measures to combat the problem, including mandatory electronic invoicing and the use of software that connects cash registers directly to the tax authorities.
Electronic sales suppression, a growing problem
In conclusion, electronic sales suppression is a growing problem that is costing governments and tax authorities billions of dollars in lost revenue each year. Business owners who engage in such fraudulent practices can face serious penalties, including fines, jail time, and damage to their reputation. To avoid these consequences, governments should assist businesses to ensure that their electronic records are accurate and transparent, and set level playing field for all taxpayers to comply with tax laws and regulations in their respective jurisdictions. Governments should continue to invest in technology and enforcement efforts to prevent instances of sales suppression.
