We have previously discussed how the Italian government is leveraging tax incentives to help boost e-invoicing adoption between private companies. After all, B2G e-invoicing has been mandatory in Italy for a couple of years now, but that has not led to a particularly impressive increase in the total amount of B2B e-invoices. Tax incentives that the government put on the table were mostly related to the simplification of administrative burdens related to VAT reporting. In hindsight, these incentives may have seemed attractive but have been insufficient in increasing the level of B2B e-invoicing in Italy.
Closing the VAT gap through related B2B e-invoicing
We often reiterate that the most fundamental driver for governments to regulate the e-invoicing process is the need to close the VAT gap – and Italy is by no means an exception. So when paper invoicing is still the predominant process in the country and when increasing the tax rates even more is not really on the table for politicians, what else is there to do? In an extreme measure to help close the country’s remarkably large VAT gap, the Italian government has recently announced that it aims to make also B2B e-invoicing mandatory.
Seen from a global perspective, this makes complete sense – just take a look at the success story that is Mexico. However, seen from a European Union perspective, the idea is problematic to say the least. The EU VAT Directive (2010/45) clearly states that a buyer must agree to exchanging e-invoices and for Italy to by law force buyers to agree is in violation of that principle. The Italian government has acknowledged this, but at the same time has declared its intent to negotiate with Brussels, thereby hoping to become the first EU Member State to get an exception from this principle. We’ve already seen how this legal inhibitor in France has driven a similar well-intended legal change into the wall – although the fact that the proposed law was called ‘loi Macron’ may give it a second chance after the recent elections.
Mandatory B2B e-invoicing – a shift in EU policy
A successful outcome of the negotiation for the Italian government would constitute a significant shift in EU policy. It’s not going to be an easy negotiation, but an Italian victory could have some significant side benefits. Allowing mandatory B2B e-invoicing could be the start of a solution to some of the worrying trends we’re seeing right now. Bit by bit, countries such as Portugal, Spain and Hungary are regulating the VAT reporting process in a very fragmented way simply because they can get away with it without EU approval. If B2B e-invoicing started becoming mandatory throughout the EU, it would be hard for Brussels to continue its ostrich politics on the cacophony created by this uncoordinated introduction of automated reporting.