Peter Boerhof of Vertex Inc discusses the introduction of mandatory e-invoicing within Europe and why businesses should start investing in their indirect tax strategy in preparation.
E-invoicing is a topic climbing up the business agenda as European tax authorities look to integrate digital efficiency with indirect tax compliance. This transformation has been largely driven by the realisation by governments that large amounts of revenue can be generated by collecting from those parts of the economy where revenue goes unreported. In 2020, it was estimated that EU member states in total lost €90 billion in VAT revenue due to tax fraud and insufficient tax collection mechanisms.
Commonly known as the ‘VAT gap’, the difference between expected VAT and VAT effectively collected, indirect tax compliance has become an important issue to ‘solve’, especially given today’s economic uncertainty.
Although proposed, there is no directive in place yet to enable the European Commission (EC) to standardise B2B or B2C e-invoicing. However, whether the EU VAT in the Digital Age (ViDA) proposal is adopted or not, it is likely we will see a domino effect of countries mandating it anyway. With the question revolving more around the ‘how’ than the ‘if’, businesses will need to start preparing for this eventuality to not only avoid the risks associated with non-compliance, but also to take advantage of the potential efficiency benefits it creates.