Mid-Year Indirect Tax Trends Part 2: AI, VAT Shifts, and Global E‑Invoicing

I examined why U.S. state and local tax jurisdictions are raising rates and hunting for new revenue. Now it's time to go global, where the view is just as eventful, if not more so. Around the world, tax authorities are training AI on taxpayer data, governments have issued temporary VAT cuts that will eventually claw back, and e-invoicing mandates are multiplying faster than anyone can standardise them. Each of these trends poses distinct compliance risks:  

AI Tax Audits are Moving From Pilot to Practice

Indirect tax groups are not alone in investing in AI upskilling. Tax administrations are actively piloting and expanding their use of AI tools to help detect anomalies, errors, and instances of fraud, as well as driving efficiencies and improving customer service. Last month’s 30th General Assembly of the Intra-European Organisation of Tax Administrations (IOTA) in Hungary highlighted how AI and the behavioral insights it generates are improving compliance via “AI-driven fraud detection, smarter customer service, and behaviorally informed strategies that boost compliance.” The same focus is evident in the U.S., as the Federation of Tax Administrators is equally interested and active in pursuing AI-assisted audits and workflow management – raising the bar for clean, accurate, and well-documented tax data.

VAT Exemptions and Sales Tax Holidays Create a “Buy Now Pay Later” Dynamic

In response to spiking energy costs and rising inflation stemming from Middle East geopolitical conflicts, many global VAT regimes enacted temporary VAT rate reductions and exemptions in the first half of the year. State and local tax jurisdictions also sought to provide relief from rising prices by creating new tax holidays, issuing new exemptions, and cutting excise taxes on gasoline. These time-bound rule and rate changes pose tax compliance challenges for indirect tax groups; they also reduce tax revenues while creating additional pressure to raise indirect tax rates or expand the tax base in the future.  

Global E-Invoicing Mandates are Accelerating and Splintering

Vertex’s recent monthly rundown of global e-invoicing developments discusses updates in Spain, France, Germany, Belgium, Croatia, the UAE, Slovakia, Sri Lanka, Malaysia, and the Dominican Republic. “May was a big month for e-invoicing, not because of one headline announcement, but because of the number of markets moving at once,” explains Patricia Jordan, Vertex’s EMEA E-Invoicing Solutions & Strategy Leader. However, the accelerating pace of e-invoicing rule adoption and – just as important – rule updates is not moving in harmony. This foists another layer of compliance complexity on global tax departments and their e-invoicing automation solutions. While the U.S. is unlikely to implement a federal e-invoicing scheme, e-invoicing interest and momentum are arising from other sources: B2B companies that view digital payments as a valuable opportunity to improve speed, processing efficiency, and cash management. The stated mission of the Digital Business Network Alliance (DBNA) – whose growing membership roster includes ecosio, a Vertex company – is to “enable a secure and efficient exchange of B2B e-invoices and e-documents for companies in the United States.”

These trends intersect, of course. Tax revenue declines caused by exemptions and tax holidays may spur increases in future auditing activity as cash-strapped jurisdictions seek to close budget gaps. And, as countries with e-invoicing mandates amass more taxpayer financial and tax data, they will be able to apply AI tools to larger and larger datasets to expose anomalies and errors and to help guide appropriate interventions.  

All the more reason, then, to get your tax automation house in order. In addition to optimising existing tax technology, many tax groups at companies with global operations will need to implement new solutions to satisfy new e-invoicing and real-time reporting compliance requirements.  

That necessitates a well-planned effort: “Successful implementations of scalable e-invoicing solutions require a rare combination of regulatory expertise, technology integration expertise, and cross-functional collaboration,” as my colleague Lauren Tallman – Vertex’s Director of E-invoicing Global Solutions Operations & Enablement – reports. Lauren, who presented on “Global E-Invoicing and the Next Tide of Pre-Populated Returns” at the Institute for Professionals in Taxation’s (IPT’s) recent annual conference, describes what successful e-invoicing implementations involve here.