Indirect Tax Forum 2019 key takeaways
Trends and developments in the VAT world
- The creation of a global VAT structure is a key hope for tax professionals
- The OECD could create more guidance on how an international structure should work
- The OECD has discussed how best to create an effective global system for taxing online platforms at its annual meeting
- The creation of an international system could involve ‘green channels’, creating an easier tax system for compliant businesses
- The harmonisation of VAT is something that everyone is excited by but the exact structure of how it may work is unclear
Technology, data and VAT (see article here)
- The pace of legislative change is making it nearly impossible to have an indirect tax strategy
- Uncertainty around what change will be needed and when hinders tax heads in requesting resources from boards
- Some tax heads believe there are too many tax technology offerings and would prefer one ‘wing-to-wing’ solution
- Some hope that technological solutions such as AI may help more accurately forecast legislative changes
The practicalities of dealing with e-invoicing (see article here)
- In January 2019, Italy introduced an advanced e-invoicing requirement. Different e-invoicing requirements exist in Hungary and Spain.
- Italian e-invoicing rules make the Italian tax authorities critical to domestic commerce in Italy
- The direction of travel for e-invoicing is clear. EU member states are hurtling toward it.
- The lack of uniformity between different EU systems, and other e-invoicing systems present in Latin America, means most companies are facing these issues for the first time
- Companies must not view this as simply a tax or IT issue. Complying with the new requirements means redefining processes across the whole company.
Global VAT management (see article here)
- Europe’s tax authorities must learn to trust each other in order to keep advancing a common VAT regime, a tax head told ITR’s audience
- Technology has facilitated VAT harmonisation, the tax head said, so that tax professionals are now keener than before on ideas such as the general reverse charge mechanism
- The Biosafe decision also set a welcome precedent of authorities adopting a less pedantic approach to VAT refunds, said the tax head
- But another tax head told delegates that European VAT harmonisation still has a way to go, citing Ireland’s difficulty in implementing the ECJ’s decision in Skandia
The taxation of the digital economy
- Much of the OECD digital tax debate excludes indirect tax, because it concerns nexus while indirect tax, under OECD principles, operates under the destination principle.
- But the opposite of this is US case Wayfair, where the Supreme Court decided on matters of nexus deeply affecting indirect tax liabilities
- Wayfair also applies to foreign companies selling into the US, which is something Europeans tend to forget.
- Much of the momentum toward assigning liability to platforms is because Chinese sellers on such are undermining EU VAT systems by not paying VAT, and EU member states have no way of forcing them to
VAT and customs duty post Brexit – Preparing for the unknown
- Uncertainty about Brexit as a result of political UK divisions is pervasive among European companies.
- There is little clarity about what a final deal will look like, when the UK will finally leave the EU, and how long any extension will be post-March 29 2019, the scheduled leave date.
- In Germany, SMEs are not prepared for a no-deal Brexit at all. While large organisations have invoked contingency plans, most companies are still operating under the assumption Brexit will not occur.
- In the Netherlands, Brexit has triggered an uptick in commercial activity. One panellist noted that there was “no storage space left to rent”.
- European customs borders are severely ill-equipped for a Brexit and already suffer from overcrowding. Post-Brexit, export/import compliance checks could take 2-3 times longer. Germany’s finance minister has already called for 900 new customs officers but, said one panellist, “these don’t grow on trees”.