When New York first passed its law defining what constitutes a “vendor” subject to collecting sales tax in the 1980’s, the idea of online shopping sounded like science fiction. In retrospect, NY may have effectively enacted the first “economic nexus” law when they drafted their definition of “vendor” to include a person who regularly or […]
Why a Conference in Portugal Could Set a Course for the Future of VAT Enforcement
The CIAT/IOTA Conference taking place next month in Portugal demonstrates the global emergence of a major trend: real-time tax control and enforcement. The conference, which two regional tax organizations will co-host, could provide the foundation for how European tax administrations will implement their electronic invoicing and VAT control regulations for years to come.
The joint conference is the first to involve both the Latin American Inter-American Center of Tax Administrations (CIAT) and the European Inter European Organization of Tax Administrations (IOTA) at the same time. CIAT and IOTA promote cooperation and technological evolution among national tax administrations, including the Portuguese Tax and Customs Authority (AT), Portugal’s equivalent to the IRS, which will also sponsor the conference.
Europe looks to Latin America
Given Latin America’s leadership position in mandating electronic invoicing and other real-time processes, European tax officials are looking to Latin America for guidance on using technology to enforce VAT control. The Lisbon show represents the first major coming together in one place of tax administrators and organizations from the two continents.
The event is restricted to officials from national tax administrations and will provide a forum for them to exchange ideas on specific topics surrounding audit and enforcement, rather than on more theoretical matters such as tax law or high-level policy.
Lisbon could set the tone
The CIAT/IOTA event will very likely set the tone and pace for European tax administrations to work towards radical changes in the enforcement of VAT, as well as other, especially indirect, taxes. With Italy, Spain, Hungary, Portugal and Greece in the lead, European nations will likely follow different paths towards the inevitable outcome of transaction “clearance;” some countries will gradually increase the frequency and granularity of their existing e-reporting schemes, while others such as Italy will repurpose existing public procurement platforms for real-time VAT controls.
The interim period – which could last between five and fifteen years – will be difficult, and it will present major challenges to companies all over the world. One thing that is certain, however, is that real-time tax control and embracing emerging technology are trends that are sweeping global tax administrations. The ideas and decisions that spring from the Lisbon conference are likely to have an impact not only in Latin America and Europe but also globally as tax administrations turn to automation to facilitate real-time functionality.
Sovos is ahead of the curve
These are developments that we at Sovos have long predicted. We are building an organization and product portfolio that can help companies of any size focus on their core businesses while governments push ahead with their own digital transformation.
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