Why the Creation of a “United Nations of Digital Tax” Is a Game-Changer for Digital Business Transformation

Christiaan Van Der Valk
November 20, 2018

The event largely went unnoticed in the general press, and even the business and IT press hardly paid attention. Yet the proceedings that unfolded in October 2018, when more than 80 of the world’s tax administrations came together at a Tax Summit in Lisbon, would be major financial headline material if more people understood their impact.

There is no doubt in any expert’s mind that the platform that was created at this Tax Summit organized by IOTA and CIAT – respectively the leading Europe-and-beyond and the Latin America-and-beyond organizations of tax administrations – creates a de facto “United Nations of Digital Tax,” which has the power to redirect the digital transformation of business as we know it.

How businesses got a digital head start

The basic ingredients of today’s digital revolution in business and civil society started in the 1990s when telecom monopolies were broken down in the US and Europe. Injecting competition into that market quickly set off a wave of innovation that yielded the internet as we know it today. In parallel, the United Nations Commission on International Trade Law (UNCITRAL) from 1996 onwards issued a succession of consensus model laws and treaties that set a relatively cohesive framework rendering the use of e-commerce, e-signatures and e-contracting commercially viable around the world.

By contrast, governments have always jealously protected their right to tax transactions within their jurisdiction using methods and tools of their design. Whenever new laws to facilitate the use of modern IT by businesses and consumers were discussed in any government body, someone would stand up and make sure a footnote was inserted clarifying that such measures would not apply to tax, which until further notice by each competent tax administration would have to remain paper-based.

As a result, businesses had several decades during which they could push ahead with the adoption of digital tools for driving friction out of supply chains and conquer new markets without too much digital red tape from tax, customs and similar law enforcement functions. This meant that certain documents or data of specific value to these areas of public administration still had to be issued and stored on paper – but all in all that didn’t stop businesses from starting journeys of profound change based on available technologies.

The revenge of a footnote

The Lisbon Tax Summit has shown that those days of carving out tax from the digital revolution are officially over. Tax administrations now have a place to work together as they roll out programs towards the establishment of what might be viewed as giant business transaction eavesdropping machines. A key feature of this approach towards ‘continuous transaction controls’ is that businesses and their software vendors are mandated by law to build connections for pushing data that they previously only exchanged with each other to these cloud-based auditing platforms in real time. Governments will leverage their newly created “UN of digital tax” for the exchange of information and best practices; however, they will continue to pursue the actual design and implementation of these cloud systems as diverse national programs.

This revolution in digital tax is spearheaded by emerging economies rather than the countries that have previously driven international law and policy. At the Lisbon Tax Summit, presentations by the Mexican delegation about a seven-step program to introduce more powerful analytics to mine transaction data and progress shown by Russia on leveraging the Internet of Things concept for point-of-sale tax enforcement made interventions by the world’s economic superpowers look oddly anachronistic.

Latin America and other geographies with early experience in continuous transaction controls are showing unprecedented improvements in tax collection. These successes are now freeing up virtually unlimited budgets for digital tax programs around the world. Many larger countries can count their gap in indirect (VAT, GST, sales or use) tax collection in the tens of billions of Euros. Spending a couple of billion a year on reengineering the way business transactions are audited until the gap is of an acceptable size is a no brainer – and probably unavoidable for countries whose sovereign debt has taken on unacceptable proportions.

Reacting to these trends risks putting your digital transformation in reverse

To exemplify what this means to the reality of international businesses, take an enterprise with a 5 million Euro budget for digital modernization for 2019 – and let’s say this company does business in six countries that during that year will either launch an entirely new continuous control mandate or substantially change an existing one.

Since every country will impact existing and planned digital tools used by this business in different ways, it is fair to assume that at least half of its 2019 budget needs to be redirected to staying compliant in these six countries. Because in practice mandate deadlines are always too short, this company will most likely default into a pattern that by now is very familiar to multinational companies – preparations will start late and ultimately a panic fix will be agreed based on a local vendor in each country.

And this is where the real challenge starts: as digital transactions with suppliers and buyers will henceforth be managed locally in each market rather than based on corporate solutions, each mandate chips away at the company’s ability to leverage the mind-blowing power of modern IT. The combination of a quick succession of diverse country mandates and the overarching need for multinational companies to comply with law in all markets has the potential to actively reverse digital transformations.

Digital tax can be a win-win for governments and businesses alike

Companies that fully understand the trend toward digital tax mandates can also use it to their advantage. Even if tax administrations do not adopt higher levels of standardization across countries – something we at Sovos are actively working to encourage by leading on innovative ways for business and government stakeholders to collaborate towards more common views on these matters – these programs come with features that can be used to reinforce rather than weaken digital business transformation.

One strong such feature is that digital tax and in particular continuous transaction control mandates will push all your trading partners to fully dematerialize their communications with you. This will make it easier for you to onboard that recalcitrant long tail of suppliers that insist on sending you paper invoices. In addition, these mandates almost always come with a tight definition of what the tax administration considers to be a digital document e.g. an invoice, and in many circumstances these nation-wide standards can be utilized as a basis for crossing the last frontier of B2B transaction automation: touchless end-to-end transactions and accounting.

It’s time to adopt a global strategy

To reap these opportunities, businesses must take a step back and analyze their status and objectives against the backdrop of the rapidly evolving tax landscape. In so doing, they can gain significant competitive advantage and make great strides towards 100 percent digital processes. Sovos is making its expert resources available to help companies work through these issues, and we are working hard to make it easy for companies to get the best of both worlds – digital business transformation and compliance with tax law – through our unique S1 platform for globally compliant e-invoicing, e-receipts, e-reporting, e-accounting, e-archiving and tax determination.

Take Action

Learn more about Sovos eInvoicing solutions and how to stay compliant amid changing regulations.

Sign up for Email Updates

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


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 ShipCompliant
May 25, 2023
Out-of-State Breweries Gain Self Distribution, DtC Rights in Oregon

Under a settlement agreement, breweries located outside of Oregon now have more options for selling into the Beaver State, including direct-to-consumer (DtC) shipping and self-distribution to retailers. The settlement arose out of a lawsuit filed by a group of Washington breweries last year challenging Oregon laws that limited beer self-distribution to in-state breweries and DtC […]

EMEA VAT & Fiscal Reporting
May 24, 2023
VAT and Art: What you need to know

Significant inflation increases have impacted most of the world’s economies, with the UK still above 10% in 2023. This increase means a reduction in the purchasing power of consumers. Together with increases in the cost of raw materials, this has created uncertainty regarding growth of entire industrial departments and reduced profit margins for companies. The […]

North America ShipCompliant
May 23, 2023
Top 5 Myths Surrounding Retailer Direct-to-Consumer Wine Shipping

By Tom Wark, Executive Director, National Association of Wine Retailers Politics breed myths. This has always been the case as politics is, at its most fundamental, a form of storytelling. So it should be no surprise that myths have arisen as various elements of the wine industry have fought against consumers and specialty wine retailer seeking […]

May 23, 2023
IPT: Location of Risk and Territoriality

Much of the discussion on the Location of Risk triggering a country’s entitlement to levy insurance premium tax (IPT) and parafiscal charges focuses on the rules for different types of insurance. European Union (EU) Directive 2009/138/EC (Solvency II) set out these rules. However, a related topic of growing importance in this area concerns territoriality, i.e. […]

Asia Pacific E-Invoicing Compliance
May 23, 2023
Japan: New e-Invoice Retention Requirements

Japan’s new e-invoice retention requirements are part of the country’s latest Electronic Record Retention Law (ERRL) reform. Along with measures such as the Qualified Invoice System (QIS) and the possibility to issue and send invoices electronically via PEPPOL, Japan is implementing different indirect tax control measures, seeking to reduce tax evasion and promote digital transformation. […]