Technology has found its way into every corner of modern life. Immediacy is all: we swipe and click for everything from pizzas and fashion to romance and enlightenment. There has been a rapid revolution in human networking, communication and economic behaviour. Governments must keep up or be starved of revenue. In international tax, ‘digitisation’ is a natural priority for authorities. It’s the most effective way to ensure that irregularities, evasion, errors and fraud can be immediately identified, and is the best means of levering up fines and penalties. Tax authorities have grasped that data control is critical to the effective future-proofing of tax collection.
As a result, authorities are implementing digitised VAT related reporting systems, from Making Tax Digital in the UK to Polish SAF/T, Spanish Supply of Immediate Information (SII) and Hungarian Real Time Reporting (RTR). And this is just the beginning. The likelihood is that in the coming years, all EU member states will introduce some variant form of electronic reporting, with most intended to operate in real time.
In short: our tax future is digital. And it’s not just happening on a national level. The EU is also making increasing strides towards the digitisation of tax collection and enforcement. It plans to introduce a data driven MOSS for distance sales in 2021. Shortly afterwards, it hopes to consolidate the bloc’s VAT system with an overarching digital One Stop Shop.
VAT itself has already found its place in the digital revolution. New types of electronic VAT reporting are already in place or planned from Spain to Sweden, Great Britain to Greece. For the tax authorities, the ultimate goal is algorithm driven tax collection automation. Spain is already using AI to generate and respond to VAT queries. Partly, the trend towards digital is motivated by the pressing need to stem the EU VAT gap, which exceeds €150 Billion each year. Digitisation not only has the potential to stop this problem, but to reverse it.
Digitisation offers immense possibilities for streamlining and improving efficiency. It facilitates collection and enforcement for authorities and allows businesses to improve their processes. But it also weaves in additional layers of intricacy to the existing complexity of a semi-harmonised EU VAT system. Digital projects are springing up throughout the bloc with little to no consistency or coordination. Member States are responding to their own needs and imperatives, and all the while the EU is striving to harmonise systems around them.
This is, in itself, confusing and tricky terrain; most businesses require expert guidance when trying to determine their international digital VAT reporting obligations.
More fundamentally, it is important to remember that VAT remains in its essence a legal construct rather than a structured technological process. Getting international VAT right today involves having the right algorithms but also understanding the rulings of the ECJ. Human understanding must come before automation, or efficient reporting will merely write error large, and create more risk than it eliminates.
Accordance believes in bringing together deep VAT expertise and the very latest in flexible and efficient VAT tech. People are the heart of our business: and our people will ensure that you get the best from our technology.