We live in an era where technology enables automatization of many processes that for decades and even centuries have been human-based, including taxation. The term “Real-Time Economy” was coined at a Finnish university Aalto as “An environment where all the transactions between business parties are in digital format, increasingly automatically generated, and completed in real-time both from business and IT-processing perspectives. For enterprises, public sector, and citizens this means, for example, that orders, order confirmations, invoices, and payments flow from system to system without delays. This makes it possible to move towards electronic archiving, electronic book-keeping, and automated accounting.”

How will Tax Administrations (TAs) be able to track tax in such real-time economies? We know that in Latin America this process started several years ago and it keeps improving. Therefore, it may seem strange that in most Western European countries, where B2B transactions occur in real-time, the TAs are not involved in that process and only require secure and enough evidence that may be subject to audit. Thus, even though the VAT flows in real-time, the TAs don’t track it at the same pace if at all.

However, recently the Spanish TA took the first fundamental step in this integration, the details of which can be read in another post in this forum. The 1^st if July enters in force a mandate called Sistema Inmediato de Información that requires from a certain industry segment to regularly report electronically their accounting books. In Eastern Europe, Russia started with that same approach several years ago and only after introduced e-invoicing.

When the Spanish mandate was announced, during a presentation to a large community of ERP users, the Spanish TA mentioned that several European TAs wan to position themselves in the same way as Latin-American TAs have already done. Furthermore, several TAs have observed that it doesn’t make sense to keep information about the commercial transactions somewhere in an archive, waiting for a possible auditor in some years. Latin-America has shown that such information is more valuable in real-time, both for the enterprises and for the TAs themselves, to efficiently settle taxes, to detect tax evasion/fraud, to fight black economies and to enable new business opportunities like factoring, in addition to OPEX reduction and paper costs.

No doubt that in electronic taxation matters, it is Europe who is learning from Latin America, with the difference that while in Latin-American TAs started regulating e-invoicing clearance, in Europe they start regulating the electronic reporting of accounting books.

To conclude, even though there are differences how TAs start integrating with the real-time economies, eventually all TAs will have to become an integral part of them, actively regulating compliance to their real-time electronic taxation processes in parallel to the existing B2B business processes.

We could possible debate over the possible convergence of both fiscal and business processes.

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