The use of electronic invoicing (FE) has been consolidated in Latin America and the Caribbean,^[1]generating extensive benefits for tax and customs administrations, as well as for taxpayers. This instrument has been used mostly for domestic transactions to improve tax compliance, reduce tax fraud and improve the quality of service to the taxpayer.

But there is still more to be done to leverage the benefits of its use. A terrific opportunity little explored in our region is the use of electronic invoicing to improve tax and customs compliance in foreign trade operations in our countries.

This opportunity was discussed in the webinar “Uses of electronic invoicing in Foreign Trade-challenges and opportunities” conducted jointly by the tax and trade and investment divisions of the IDB and CIAT.

During the event, representatives of the tax administrations of Brazil and Mexico, for example, highlighted that most electronic invoicing operations in their countries refer to operations that occur exclusively within their national jurisdiction. Although Brazil and Mexico are among the few countries in our region that use electronic invoicing for foreign trade operations, they also pointed out that these operations represent only a small fraction of the expected potential.

For example, in Brazil in 2020, 3.2 billion electronic invoices were issued, of which only 60.8 million were related to import and export operations. In Mexico, 6.7 billion of e-invoices were generated, of which only 18.8 million were issued from import between October 2020 and September 2021. It should be noted that the amounts and importance of these foreign trade operations are significant.

Electronic invoicing for international trade?

The e-invoice of international trade is an innovative tool that allows automating and improving the flow of information between customs and internal tax administrations without any of these losing their functional independence, thus improving their operational capabilities.

The tax authority receives the information of a commercial operation when an e-invoice is issued,  or modified in some way, and can be transferred or verified by customs directly or through the single window of foreign trade, facilitating the traceability of the transaction. At the same time, the foreign trade e-invoicing improves the administrative and fiscal control of the taxpayer, by being automatically recorded in their accounting records and in their tax account.

A good example of these benefits is the case of Brazil, which in 2018 implemented the Single Export Declaration system, which has as its main element the electronic invoice for export. This development, made by the Federal Revenue of Brazil, has brought substantial results from the point of view of the reliability of the data associated with the transaction, accessible through a key via the e-invoicing. In addition, the project has generated a decrease of 85% of paper documents, a reduction of 60% of the amount of information required and more than 50% of the processing time, going from 13 days in 2014 to 6 days, and resulting in a potential saving of US$ 12.5 billion in 2019. In addition, with the use of e-invoicing, it is possible to trace the product from the producer to the exporter, reducing fraud.

Implementation of an electronic invoice at the regional level for foreign trade

The value of the use of the export-import e-invoicing increases, as it is widely implemented regionally and internationally as a fundamental element of foreign trade operations. Foreign trade e-invoicing not only has a positive impact on revenue management but is a cornerstone for promoting regional integration and better insertion of companies into regional and global value chains.

As countries implement electronic invoicing systems to control internal taxes and to facilitate compliance by taxpayers, the conditions for developing an electronic invoice for foreign trade at the regional level are enhanced. In addition, there is now a renewed willingness between countries and between tax and customs administrations to cooperate in the exchange of information, and there is a range of technologies that facilitate the exchange of data, including cross-border exchanges through automation and interoperability of systems.

The World Customs Organization highlighted during the webinar the benefits of cooperation between internal taxes and customs, to verify the authenticity of transactions and combat illicit financial flows, while improving trade facilitation for operators with high levels of compliance.^[2]

The actors involved are the tax and customs administrations of the countries that are parties and engage in the operation, but we must also add the other actors: exporters, importers, customs agents, carriers, ports and airports, and government agencies involved in the management of certificates, and security issues in a context of coordinated management of borders.

Certainly, there are many challenges related to regulatory aspects, the harmonization of the data model, the definition of the data set, the introduction or massive use of the signature, and also of a technical nature to have proper interoperability. But, again, modern technologies open a world of opportunities to promote the proper transmission of data, as well as its traceability with technologies, such as blockchain.

In the same way, the implementation of the electronic invoice of foreign trade generates a wealth of data that can be exploited for the use of data analytics and artificial intelligence techniques or machine learning, and thus design more effective and efficient public policy interventions.

The opportunities clearly overcome the challenges, hand in hand with cooperation and technology. Both the IDB and CIAT are committed to encouraging and supporting initiatives that develop and strengthen the use of e-invoicing, also in its foreign trade aspect.

[1]Countries with consolidated e-invoicing implementations include Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Mexico, Peru, Uruguay; and in the process of implementation or expansion are Bolivia, the Dominican Republic, El Salvador, Panama, Paraguay.
[2]customs-tax-guidelines.pdf (wcoomd.org) and customs_tax_guidelines_sp.pdf (wcoomd.org)

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