Businesses in the European Union demand a harmonisation of digital reporting requirements as they encounter a significant administrative burden when operating cross-border, according to speakers at the IFA Congress, held in Berlin last week.
“There are two issues that we are facing: excessive fragmentation and high administrative burden for businesses operating cross-border,” said Charlène Herbain, official in the VAT unit of DG TAXUD at the European Commission in Luxembourg.
Members states that have introduced reporting requirements are successful in tackling fraud, but there remains a lack of simplicity – causing an additional cost for corporations.
“We need to set up a common reporting,” Herbain explained.
Particularly for VAT, a new reporting system could resolve issues related to sub-optimal collection and control of the tax, and remove the excessive administrative burden and compliance costs.
It would enable better VAT collection and control and would simplify the system as a whole.
In other words, a revised system would unlock opportunities provided by technology, promote convergence, and reduce burdens.
This could have positive consequences for market participants. For example, a new system would provide further certainty and be environmentally friendly through the reduction of paper usage. It would also drive business automation.
“Businesses need to invest in innovative solutions. The dematerialisation of invoices also reduces costs,” Herbain said.
“It could also optimise value chain – which is a strong business automation gain,” she added.
Towards an EU DRR
To remove the significant burden and costs that businesses face, there are two options that the EU could implement.
The first is a partial harmonisation of reporting requirements. This would involve EU digital reporting requirements (DRR) for intra-EU transactions and the removal of recapitulative statements.
DRRs would also remain optional for domestic transactions and “converge in the medium term to the EU DRR”, according to speakers.
The second option would involve a full harmonisation, in which an EU DRR is introduced for both domestic and intra-EU transactions. Recapitulative statements would also be removed and the convergence of existing DRRs in the medium term to the EU DRR would also be assured.
Georg Geberth, director of global tax policy at technology company Siemens in Munich, said many companies now see the merits of e-invoicing, but their views on digitalisation clash with tax authorities’ ambitions.
“It’s being implemented in different ways in different countries – there is no harmonisation. You can create a win-win situation. The motivations are different for tax administrations and businesses,” he said.
“Tax administrations want more information – for businesses, it’s about efficiency,” Geberth added.
Corporations could largely benefit from a standardised reporting concept in Europe, as it would reduce the overall cost of tax filing and improve the audit system. In the meantime, taxpayers will have to wait for a legislative proposal – scheduled for November 2022.
