We recently launched the 12th Edition of our Annual Trends Report. We put a spotlight on current and near-term legal requirements across regions and VAT compliance domains. The report, “VAT Trends: Toward Continuous Transaction Controls” is authored by a team of international tax compliance experts and provides a comprehensive look at the regulatory landscape as governments across the globe are enacting complex new policies to enforce VAT mandates, obtain unprecedented insight into economic data and close revenue gaps.
Central to this year’s edition is our focus on four emerging tax mega-trends with potential to drive change in the way multinational businesses approach regulatory reporting and manage tax compliance.
The Four Tax Mega-Trends
The mega-trends include:
- Continuous Transaction Controls (CTCs) – Countries with existing CTC regimes are seeing improvements in revenue collection and economic transparency. Now, other countries in Europe, Asia and Africa are moving away from post-audit regulation to adoption of these CTC-inspired approaches.
- A shift toward destination taxability for certain cross-border transactions – Cross-border services have historically often escaped VAT collection in the country of the consumer. Due to a large increase of cross-border trade in low-value goods and digital services over the past decade, administrations are taking significant measures to tax such supplies in the country of consumption or destination.
- Aggregator liability – With the increase of tax reporting or e-invoicing obligations across different taxpayer categories, tax administrations are increasingly looking for ways to concentrate tax reporting liability in platforms that naturally aggregate large numbers of transactions already. Ecommerce marketplaces and business transaction management cloud vendors will increasingly be on the hook for sending data from companies on their networks to the government, potentially even inheriting liability for paying their taxes.
- E-accounting and e-assessment – Combining CTCs with obligations to synchronize entire accounting ledgers makes onsite audit necessary only in cases showing major anomalies across these rich data sources. Over time, the objective is for VAT returns and other tax reports to be prefilled by the tax administration based on taxpayers’ own, strongly authenticated source system data.
According to Christiaan van der Valk, lead author of the report and vice president of strategy at Sovos, continuous transaction controls have emerged as the primary concern for multinational companies looking to ensure tax compliance despite growing diversity in VAT enforcement approaches. Tax authorities are steadfast in their commitment to closing the VAT gap. As a result they will use all tools at their disposal to collect revenue owed. This holds especially true for the aftermath of COVID-19, when governments are expected to face unprecedented budget shortfalls.
VAT Trends: Toward Continuous Transaction Controls
Beyond the mega-trends, our report includes a major review of country and regional requirement profiles. These profiles provide a snapshot of current and near-term planned legal requirements across the different VAT compliance domains. The report also examines how governments have embraced digital transformation to speed revenue collection, decrease fraud and narrow VAT gaps.
“VAT Trends: Toward Continuous Transaction Controls” is the most comprehensive report of its kind. It provides an objective view of the VAT landscape with unbiased analysis from tax and regulatory experts with years of experience navigating the world’s most complex tax environments. If you are a tax, IT or legal professional working with multi-national companies, we strongly encourage you to download and become familiar with the subject-matter contained within. The pace of change for tax and regulatory environments is accelerating and this report will get you prepared.