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IFA 2022: Common digital reporting standards are sought by the EU

A standardized reporting system in the EU will save administrative expenses for firms and improve audits, according to panelists at the IFA Congress in Berlin.

According to speakers at the IFA Congress, which was held in Berlin last week, businesses in the European Union seek a standardisation of digital reporting rules since they experience a major administrative burden when operating cross-border.

According to Charlène Herbain, a representative of the VAT section of DG TAXUD at the European Commission in Luxembourg, "there are two issues that we are facing: excessive fragmentation and high administrative burden for businesses operating cross-border."

States with reporting laws are effective at combating fraud, but there is still a lack of simplicity, adding to the expense to businesses.

Herbain said, "We need to set up a common reporting"

A new reporting system, especially for VAT, might address problems with insufficient tax collection and management, as well as reduce excessive administrative load and compliance costs.

It would improve VAT control and collection while also streamlining the system as a whole.

In other words, a reformed system would take use of technological potential, encourage convergence, and ease constraints.

The impact on market players might be favorable. For instance, a new system would increase certainty and be better for the environment by using less paper. It would promote corporate automation as well.

"Businesses need to invest in innovative solutions. The materialisation of invoices also reduces costs," according to Herbain.

She said, "It could also optimise value chain – which is a strong business automation gain."

There are two measures the EU may do to relieve the heavy load and high expenses that firms bear.

A partial harmonization of reporting standards is the first. Recapitulative statements would no longer be required as a result of EU digital reporting requirements (DRR) for intra-EU transactions.

Speakers stated that DRRs will continue to be optional for domestic transactions and "converge in the medium term to the EU DRR."

A full harmonisation, where an EU DRR is implemented on both domestic and intra-EU transactions, would be the second alternative. Additionally, recapitulative statements would be eliminated, and it would also be guaranteed that current DRRs will eventually converge with the EU DRR.

Many businesses already recognize the benefits of e-invoicing, but according to Georg Geberth, head of worldwide tax policy at technology giant Siemens in Munich, their goals for digitalization are at odds with those of the tax authorities.

"It’s being implemented in different ways in different countries – there is no harmonisation. You can create a win-win situation. The motivations are different for tax administrations and businesses," he added.

Geberth continued, "Tax administrations want more information – for businesses, it’s about efficiency.

A standardized reporting approach in Europe would mostly benefit businesses since it would lower total tax filing costs and strengthen the audit system. Taxpayers will have to wait until a legislative proposal, which is expected in November 2022.



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