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Tax directors have urged the EU and member states to harmonize data requirements to avoid misalignment of requirements among member states and to ensure that companies in the bloc hold a proportionate amount of data.
The need for data harmonisation is particularly acute in the EU, according to Francois Herbecq, Benelux tax director at L'Oréal, as individual member states increase digitalisation requirements and begin implementing their own unique systems.
"I am afraid harmonisation will come too late if things carry on at this rate as it will take another 10 years for it to take effect," Herbecq said.
Tax experts also stressed the importance of the EU and member states taking into account the time it took to implement some of their VAT digitalization measures.
"It takes time to implement a lot of these changes that are announced by member state governments, for instance, it took six months to implement automatic inter-company transaction reporting," Herbecq said.
When it comes to data requirements, Tiina Ruohola, head of VAT at the Confederation of Finnish Industries, stressed the importance of proportionality. She stated that one of the issues they had noticed at the EU level was that tax authorities were requesting excessive amounts of user or company data.
"What we should be doing instead is asking only for data that will actually be used and questioning, in the first place, what data will be used for," Ruohola said. "It is only when we know that we are fully utilising the data we have that we can we ask for more data."
Herbecq expressed his skepticism about whether some tax authorities really needed so much data and questioned how that data could be used for tax enforcement purposes.
Other tax professionals pointed to Finland as an example of a country with a small VAT gap and a simple VAT return process. Unlike some southern European countries, the process does not impose additional reporting requirements on taxpayers.
"We are looking at data and proportionality issues and trying to address them," a policy official said. "e appreciate that different countries want and use data differently," the official added, "but we aim to have harmonisation and proportionality soon."
The EU is expected to announce legislative proposals in October this year to establish a framework for VAT reporting obligations or e-invoicing, which will address the future of VAT digitalisation in part.
Harmonization is a goal for the EU, but it is difficult to achieve for political reasons. Some tax experts recommend that member states either wait for the EU proposals in October or begin aligning their digitalization processes with EU standards now.
By fLEXI tEAM