The VAT gap in the European Union, the difference between the expected VAT revenue and the amount actually collected, was almost EUR 150 billion in 2018! How on earth are you going to close this huge gap? In the absence of a unanimous approach, each country is tackling it in its own way. This doesn’t make Tax Managers at international companies any happier, does it?
Just the beginning
Italy, for example, recently took a serious step by launching an electronic invoicing platform, the ‘Sistema di Interscambio’ (SDI). From now on, companies will be obliged to send invoices digitally via this government platform. England (which is still a member of the EU ‘as we write’) meanwhile introduced its own ‘Making Tax Digital’ (MTD) programme, requiring tax returns to be submitted electronically to the English tax authority, Her Majesty’s Revenue and Customs (HMRC). These measures, however, are not nearly as far-reaching as in Spain, for that matter. The ‘Suministro Inmediato de Información’ (SII) requires all Spanish companies with an annual turnover of over EUR 6 million to upload all VAT-related data to the website of the Spanish tax authorities via XML files every four days. For all these countries, this is only the beginning.
The response by Tax Managers
The exchange of data between businesses and the tax authorities of different countries is becoming increasingly important and extensive. The question here is: how do you deal with this as Tax Managers at an international company? Can you keep up with these substantial changes at the pace required by the countries? Quite a few Tax Managers we know simply assume that suppliers of financial (ERP) systems automatically ‘absorb’ all new and ever-changing requirements. Nothing could be further from the truth!
Obviously, these systems will support the (digital) submission of some data extract, for example via an XML file. However, to this end a complete upgrade of the software to the latest release is often inevitable, with all the costs and risks that this entails. And what if the government comes up with new changes soon after that, however insignificant? Exactly: you will be facing yet another costly and time-consuming upgrade.
Automatic VAT rules
But even then, the champagne will have to wait. After all, an XML file generally only contains those data VAT experts are only too happy to put in the ‘mailbox’ of the tax authorities for a pleasant fee. But is these data correct, complete, validated and secure? And can failures that may occur easily be detected and repaired? This is quite apart from the question how such XML files have been created in the first place. All too often it turns out to be nothing more than a file derived from non-financial spreadsheets such as Excel, cobbled together with macros or formulas.
All in all, we still see a lot of manual work being done, even in determining VAT rules. These are often entered manually on transactions, without applying efficient, automatic VAT rules that can be set up in various financial or ERP systems, including Oracle e-Business Suite.
Future-proof?
Do Tax Managers have a fair view of all the costs involved in drafting and filing VAT returns for their organisations in the various EU countries? And is the approach chosen future-proof? We clearly don’t think so. The question here is: are we looking through rose-tinted glasses or is it the Tax Managers?
Admittedly, we are somewhat opinionated at 4apps in a way. After all, we are experts in the automation of VAT-related administrative processes, including the interaction with the various tax authorities, without the need for upgrading and being future-proof at the same time.
Just in case you are willing to look at VAT processing and accountability through different glasses, please contact us for more information about itax4apps.
You can also contact Henk Tiesma directly via +31 646 178 187 or h.tiesma@4apps.com
