E-Invoicing: Tax Compliance or Economic Boost?
There are two reasons why so many countries are currently mandating e-invoicing
As electronic invoicing mandates continue to be a major trend across all continents, multinational organisations are setting up global project teams to support local offices. Since electronic invoicing has become a method for tax authorities to lower the VAT gap, many organisations rely on their (indirect) tax departments to support electronic invoicing projects. But is this the correct approach? And is electronic invoicing really becoming a tax topic?
of this shortfall is attributed to international VAT fraud. Other contributors to the gap are company liquidations, inefficiencies in tax administration, and legal sales tax structures within corporate organizations.
To answer these questions we first have to go back to the first B2B e-invoicing mandates in the late 2000s in Brazil, Mexico and South Korea. All three countries introduced these mandates to fight corruption and lower the VAT gap. With the rest of South America following with e-invoicing mandates, it soon became a popular tool for tax authorities to fight tax evasion. But it didn’t stay in South America. In the late 2010s, the tax authorities in Hungary and Italy also implemented e-invoicing mandates to counter tax evasion. Most recently, Saudi Arabia implemented a similar model.
But is fighting tax evasion the only reason electronic invoicing is being mandated? Not necessarily. Over the past few years, European countries have introduced B2G mandates where the electronic invoice does not pass through the tax authorities first. In addition, both Belgium and Denmark are currently working on electronic invoicing mandates aimed at decreasing payment terms between companies and thus supporting smaller companies with their cash flow.
To sum up, there are two reasons why so many countries are currently mandating e-invoicing:
- To fight tax evasion and close the VAT gap.
- To support smaller companies with their cash flow.
Whether a country adopts an e-invoicing mandate for one reason doesn’t mean it cancels out the other reason. It could be that Belgium and Denmark opt for an e-invoicing mandate in which closing the VAT gap is integrated at a later stage. The opposite is also true: a country may decide to introduce a mandate to close the VAT gap and then create or implement services to support smaller companies with their cash flow. For example, Peru offers factoring services to sell invoices.
Overall, electronic invoicing is mostly mandated by governments to close the VAT gap, and that e-invoicing is in fact becoming a tax subject. This means that including your (indirect) tax department in any global e-invoicing project is the way to go, although I would recommend including both the finance and IT department in a global project as well.
If you want to know more about the difference between e-invoicing mandates and e-reporting, watch our webinar via the link below
If you want to know more about the difference between e-invoicing mandates and e-reporting, watch our webinar via the link below
https://www.pagero.com/videos/ctc-vs-ptc-difference-e-invoicing-e-reporting
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