Electronic invoices and equivalent documents

Undoubtedly, the use of electronic invoices, electronic debits or credit notes and similar, to replace their paper equivalents in order to document transactions between taxpayers is now a reality. As an example, one billion electronic invoices were issued in Brazil during the second half of last year,  all stored entirely in state and national governments, and approved prior to their authorization. The system started operating a few years ago. In the first half of this year, and in less than one year, it reached two billion invoices.

Of course, these numbers are explained by the fact that this is a very large economy. Also, because a gradual mandatory schedule has been established. Besides, without doubt, the proposal has been successful and beneficial to taxpayers.

But Brazil is just one of the countries that has implemented an electronic billing model promoted by the Tax Administration. With different deployment models but, with important numbers we find the pioneer Chile, who maintains a voluntary scheme.  Countries like Argentina or Mexico have chosen a system similar to Brazil as model in which some sectors are mandatory.

Ecuador is joining this group and will also adopt a compulsory gradual process. Models are not identical and there are significant variations in the form, according to the more or less active role of the Tax Administration.

The truth is that there are questions to solve in countries that are “developing” their own model: Will the administration receive summaries of the documents or the entire documents? Will it receive it in blocks at the end of a period, or more often – once or several times a day – or even will they be allowed before the term occurs? Will it include retail sectors? What kind of support will be given to small and medium taxpayers? What to do in contingency situations or in places with limited connections to the Internet? Will it be  ​​mandatory or voluntary? And if so, for whom will it be mandatory? Will it be only Rule to the fields of interest to the Administration – extrapolating the paper model – or will it add others of particular interest for different sectors? But the question that seems no longer asked is if it will be implemented or not. The answer is yes, and without doubt the question just when and how. Of course, in part, because of the benefits of the system, administrative, economic, environmental administrations certainly motivate, but also because sooner or later the taxpayers demand will grow, as a representative from a Caribbean country confirmed me a few days ago.

It’s understandable to be concerned from the perspective of citizens’ rights. The information contained in these monstrous volumes would satisfy the greed of any “big brother”, and the fact of the existence of so much concentrated information would be a plot for an “Orwellian” story. But as an incurable optimist, I think the secrecy and confidentiality must be present where appropriate and that the benefits far outweigh the obstacles and threats. Let’s rather think  in some potentialities which are:  the speed of process and savings of paper,  the increased certainty about the documents to the government and taxpayers, given both the authenticity and integrity of electronically signed documents with digital certificates as the possibility of guaranteeing the validity of tax credits reflected in those documents, the notable increase in the difficulty of implementing such practices as the so called “double billing” or the existence of companies engaged in the sale of one product: bills.

The potential for the Administration from the area of ​​control are important: total sales matching statements and invoices, purchase of invoices declared and received higher amounts of expenditure without reasonable correspondence with the declared income, the use of appropriations for economic activity are almost obvious. But it also increases the possibility of more precise controls to exempt transactions or refunds to exporters, the consumption tax refund for tourists, etc. These possibilities are even greater if we consider that in the future, the international trade exchange of electronic invoices could also grow. We are just working with the Executive Secretariat in this direction.

For taxpayers it opens the real possibility of reducing compliance costs, and even gradually release some formal obligations – report transactions of sale or later the books themselves – but, also opens the space to perform model business to business under a new paradigm, computer to computer, system to system, ERP to ERP. The possibility of proposed declarations is becoming feasible, not only in relation to the annual income tax as it is the case in several countries, but also in  more frequent statements such as the Value Added Tax.

For the ICT sectors exciting opportunities are created both to develop solutions “a la carte” as well as to create shelf solutions associated with the ERP [1]  accounting systems or the POS systems. But, also to develop services in the SaaS [2] or IaaS [3] and certainly to establish a solid foundation oriented to a greater interoperability. The possibility of integrating electronic invoices from the public sector with the payment systems managed by the treasury and the processes of electronic auctions is just a sample of the available options.

In terms of statistical analysis and economic studies the possibilities are infinite, to promote more accurate studies of specific and defined sectors, but especially if the model is associated with the use of a standard code of products and services (for example GS1) which will allow, for example, very accurately implement different rates for different products, identified very precisely in each transaction, which would better mitigate the regressive nature of VAT, as it perfectly distinguishes a Roquefort cheese from one that is used for the soup of the day.

With this Post I finish this series, and I say goodbye for now. Good day and good luck.

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