Three Decades After the Birth of EDI, Scanning is Still a Big Thing

Christiaan Van Der Valk
December 19, 2017

The future of business transaction compliance with tax and other legal requirements calls for government approaches that cater for the unlimited diversity of business processes; real-time controls are one promising avenue to do that, but on the condition that business data to be sent to government platforms maps organically onto existing business definitions of trading documents.

I know people who saw the first fully automated exchanges of structured order and invoice data between a supplier’s and a buyer’s computer back in the 1980s. I also know people who, in 2017, are investing millions in systems to scan paper supplier invoices to achieve some level of accounts payable automation. I had just started working in the early 1990s when I sent my first email through a dial-up modem. It felt good not to have to queue at the fax machine. To this day, we have partners whose core business remains secure fax management.

Business is diverse – in fact, it is so diverse that the number of ‘aha’ moments when learning about a very advanced or not-so-advanced use of technology when working with enterprises, and learning about the reasons why, is probably unlimited. As we all know, not all economic behaviour can be explained in rational terms, but the reverse is just as true: like most business decisions, this incredibly wide gap in technology adoption across businesses processes has good rational reasons most of the time.

Seeing people from across this huge automation gap in the business world talk to one another is always immensely entertaining. They may actually be people working for one and the same corporation, but you’d think they are part of different species.

There’s an important parallel with compliance. Since business processes come in endless variations, there are many ways in which a process can be made compliant. There are two ways you can think about that fact if you’re interested in compliance innovation.

The first way is to conclude that businesses must be left freely to decide how to comply within their unique process setup, as long as they can demonstrate compliance. In my opinion, this theory was shipwrecked against the cliffs of economic reality: leaving businesses the choice of how to comply with vague functional objectives means tax administrations must adjust to the countless ways in which business can do business. This is especially problematic with the growth of automation and the acceleration of transaction processing. Since tax administrations have limited means, this leaves the door open for growing enforcement inefficiencies and, in the case of invoicing, a widening VAT gap.

Many countries have started thinking about this in another way. They believe that real, economically viable innovation in tax law enforcement must come from generic, process-agnostic ‘hooks’ that any IT-facilitated process, regardless of its level of automation, can access. If tax administrations define neutral APIs that can act as micro-services with a high level of prescription as to the data that must be provided, but complete freedom as to the process or system that provides such data, the real-time economy can flourish. We often call these approaches ‘clearance systems’ and they are all the rage among tax administrations nowadays.

To achieve a well-functioning clearance approach, it is very important to define the data packages required for real-time ‘copying the government ’ in a process-neutral way. It is better for governments to keep to the level of granularity of existing business document definitions rather than defining new supersets of such data. For this reason, I believe that the European trend towards real-time reporting, which in many cases is based on an audit file format that includes not only the invoice but also various other business process data, is less business-appropriate than the ‘pure’ invoice clearance regimes in regions such as Latin America.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Christiaan Van Der Valk

Christiaan Van Der Valk is vice president, strategy. Elected a World Economic Forum Global Leader for Tomorrow in 2000, Christiaan is an internationally recognized voice on e-business strategy, law, policy, best practice and commercial issues. Formerly co-founder and president of Trustweaver (acquired by Sovos), Christiaan also holds long-standing leadership roles at the International Chamber of Commerce (ICC) and the European E-invoicing Service Providers Association (EESPA). Over the past 20 years, he has presented at and authored key papers for international meetings at the Organisation for Economic Cooperation and Development (OECD), the Asia Europe Meeting, World Trade Organization and several other UN agencies. Christiaan earned his Master of Laws degree from Erasmus Universiteit Rotterdam.
Share this post

North America Tax Information Reporting
March 22, 2024
Market Conduct Annual Statement Reminders and More

On the second Wednesday of each month, Sovos experts host a 30-minute webinar, Water Cooler Wednesday, to share the latest updates on statutory filings. In March, Sarah Stubbs shared information about the many filings due after March 1, from Market Conduct Annual Statements to health supplements for P&C and life insurers writing A&H businesses and […]

North America ShipCompliant
March 21, 2024
How Producers Can Build a DtC Shipping Market

Direct-to-consumer (DtC) shipping has become one of the leading sales models for businesses of all sizes and in all markets. The idea of connecting directly with consumers is notably attractive, as it helps brands develop a personal relationship and avoid costly distribution chains. Yet, for all its popularity, DtC is often a hard concept to […]

North America ShipCompliant
March 20, 2024
Key Findings from the 2024 DtC Beer Shipping Report

This March, Sovos ShipCompliant released the fourth annual Direct-to-Consumer Beer Shipping Report in partnership with the Brewers Association. The DtC beer shipping report features exclusive insights on the regulatory state of the direct-to-consumer (DtC) channel, Brewers Association’s perspective and key data from a consumer preferences survey. Let’s take a deeper dive into some of the […]

March 20, 2024
As the World Gets Smaller, Think Bigger About Global Tax Compliance

For the past few weeks back, my colleagues and I have been talking a lot about the importance of a global strategy when it comes to addressing today’s modern tax environments. On the heels of Sovos introducing the Sovos Compliance Cloud, many in our company’s leadership team have blogged about related topics and the critical […]

North America ShipCompliant
March 12, 2024
Florida HR 583 Set to Uncork Larger Format Wine Bottles

Florida wine lovers could soon enjoy a bigger selection of bottles based on a recent bill passed by the state’s legislature (HR 583) that would remove the existing cap on wine bottle sizes. What is Florida’s HR 583 bill? Currently, Florida law prohibits the sale of wine in bottles larger than one gallon (a little […]