
E-Invoicing to resolve the VAT gap issue across the EU.
Across the EU, the latest difference recorded for 2019 which equated to the total VAT revenue loss of 10.3 percent is termed as the VAT gap. Among other activities, the typical reasons causing major concern for governments across the continen
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CIO Applications Europe | Thursday, January 06, 2022

To bridge the VAT gap across the EU, mandatory e-invoicing can be seen as a strong case for improvement.
FREMONT, CA: Across the EU, the latest difference recorded for 2019 which equated to the total VAT revenue loss of 10.3 percent is termed as the VAT gap. Among other activities, the typical reasons causing major concern for governments across the continent is the combination of fraud and tax evasion, corporate bankruptcy, maladministration, corporate insolvency, and legal tax optimization. However, it is not all doom and gloom, a major headline from the latest VAT Gap Report is that there is a reduction in the gap between 2015 and 2019. Although one cannot simply avoid the fact that 134 billion dollars are still an immense loss.
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In real-world terms, such an amount can be utilized to pay for 2,500 kilometers of high-speed railway or 250 state-of-the-art hospitals. By next year, the EU members must address the VAT gap, specifically in terms of huge investment requirements. In order to tackle VAT gap, a strong case can be made for mandatory e-invoicing (electronic invoicing), not just within the EU but even globally. The exchange of an invoice document between supplier and buyer in an integrated electronic format is termed as e-invoicing.
When compared to traditional ways of guaranteeing VAT compliance, which often rely on periodic reporting of aggregated summary data and rare tax audits, it is essentially a more watertight manner of enforcing tax regulations and maximizing VAT collection activities. Instead, by leveraging technology and standardized datasets, governments may benefit from streamlined, accurate reporting as well as a solid audit trail that can be used to easily identify fraudulent activities. In these terms, this way of improving the transparency of VAT payments and recovery is a modernized and dramatically enhanced method.
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