UK: 
USA:
We’ve recently attended, exhibited and spoken at several major industry events; and from Spain to Florida, wherever we go and whoever we talk to, the topic on the tip of everyone’s tongue is the digitalisation of tax.
Certain themes – such as SAF-TSAF-T (Standard Audit File for Tax) is a file type based on the XML standard. It is created in a standard readable format from data exports taken from accounting records. SAF-T is used internationally to ensure the fast and secure digital transfer of tax information. It is known for its high level of security, ability to simplify the collection of tax data and simple readability due to its standardised format. and e-invoicingElectronic invoicing - widely referred to as e-invoicing - is the exchange of a digital document between a supplier and a buyer. E-invoices are issued, transmitted and received in a structured data format that enabled automatic and electronic processing. They contain data in a machine-readable format so that an AP system can read an invoice without manual data entry, leading to faster and more efficient invoicing. – have been at the forefront of the tax technology world for several years now, but driving change right now with an unprecedented sense of urgency is the imminent implementation of the EU’s VAT in the Digital Age (ViDAViDA or 'VAT in the Digital Age', is an EU initiative proposed by the European Commission that seeks to modernise and harmonise VAT processes for member states, by embracing new technologies. It is aimed at updating processes for the management of VAT, and reduce the VAT gap and fraud. The proposal also aims to address challenges in the area of VAT raised by the development of the platform economy.) regulations.
What is ViDA?
ViDA was initially proposed by the European Commission in December 2022 as a series of measures specially designed to modernise VAT in the EU and ensure indirect taxation works better for businesses, while allowing tax authorities to improve revenue collection and reduce the VAT gapThe difference between the amount of VAT revenue due to a tax authority and the amount actually collected.
There are three key changes included in the ViDA proposals:
- A new real-time digital reporting system that is based on e-invoicing.
- A single VAT registration for all businesses that sell goods or services to consumers based in the EU.
- Updated regulations relating to VAT for the platform economyThe platform economy is built upon the growing tendency for businesses - especially retailers - to use digital platforms and marketplaces to sell goods or services. Such platforms are underpinned by computer systems and allow companies to more easily reach and connect with prospective consumers with the intention of completing sales..
ViDA was initially intended to be introduced in 2024, although the EU Parliament’s Committee on Economic and Monetary Affairs recently suggested a 12-month delay to the implementation following industry feedback.
Why is ViDA so important?
As expected, with everybody we spoke to on our travels, there was plenty of talk about ViDA and the digitalisation of tax from a wider perspective.
There is almost unanimous agreement that greater reliance on technology will transform data visibility, reliability and processing; and that, ultimately, digitalisation is central to transforming tax through the 2020s and beyond.
ViDA is good news for tax authorities seeking to reduce the VAT gap, but it will also be embraced by businesses that must seize the opportunity it provides to overhaul outdated methods and comply with best practice in the digital world.
The role of data
Once systems like e-invoicing and real-time reporting are fully mandated across Europe, authorities will have access to enormous data sets – the like of which they have never known before. But, as it stands, much of that data could go to waste.
Despite widespread approval for digitalisation among tax professionals looking for more control and accuracy in activities from reporting to issue management, there remains a feeling amongst many people we spoke to that tax authorities simply don’t yet know exactly what to do with data or how to maximise its potential.
Introducing the data graveyard…
This is a problem we’ve spoken about a number of times in recent years. With digitalisation comes an unprecedented amount of data; most of which ends up in a data graveyard.
These vast, often untapped repositories of unused data sit in the ether and as far as 99.9% of tax professionals are concerned, they are effectively dead. Finished. Done. Out for the count.
But here’s a word of warning…
Just because tax authorities are not using it now and may not even have plans to scrutinise it any time soon, the fact data is being filed and stored electronically means it is not dead. Far from it in fact, as digital systems can bring it back to life at any time.
All a tax authority needs to do is decide to run a new algorithm at some point in the future and all the skeletons you thought you’d long since buried could be brought back to the surface. Any mistakes, inaccuracies or even deliberate fraud could be identified and acted upon.
How can you avoid unwanted data zombies?
Data zombies – data you believe is dead and buried but spring back into life from beyond the grave – will only become a greater threat in the coming years.
But prevention is always better than cure.
The single greatest step you can take to protect your tax team from the threat posed by data zombies is to cleanse your master data to ensure the information being used to populate your VAT returns and other compliance documents is of the highest quality.
This will enable you to file tax returns that you have complete confidence in; no matter how far into the future they may be reviewed. Also be sure to include a digital link from the final report back to the source.
And whatever you do, don’t follow in the footsteps of those businesses we’ve spoken to this autumn that continue to report from their GL data – relying on manual adjustments for tax changes and using cheat sheets that point their tax clerks in the direction of a manual selection of a tax rate for even complex transactions (most of which prove to be wrong).
If you fuel your tax processes with clean, complete and concise master data and you have excellent visibility of your entire setup at all times, you’re in the best possible position to survive and thrive in the era of digitalisation.
