Unofficial translation
VAT in the Digital Age (ViDA)
Proposal for a Regulation – COM (2022) 703 and Proposal for a
Directive – COM (2022) 701
Dear Sir or Madam,
The Institute of Public Auditors in Germany (Institut der Wirtschaftsprüfer in Deutschland e.V., IDW) would like to take the opportunity to comment on the Proposals for a Directive – COM (2022) 701 and a Regulation – COM (2022) 703 on the initiative “VAT in the Digital Age (ViDA)”. The IDW is a registered association that promotes the professional fields of auditors as well as promotes and supports the further development of the profession. The IDW represents more than 11,000 auditors – this corresponds to approximately 80% of all auditors in Germany, who commit themselves with the membership to to face requirements that in some cases go beyond the legal requirements. The IDW is committed to tax honesty. Tax honesty includes compliance with existing standards in accordance with the wording, meaning and intent of the legislator. In their role as advisors in tax matters, auditors are independent body of tax law in their role as advisors in tax matters and contribute to a constructive and contribute to a constructive relationship between taxpayers and the tax authorities.
Furthermore, the IDW recommends that members of the profession explicitly commit themselves to responsible tax advice by adopting the IDW Code of Values for Auditors and that they work in the interest of the common good to ensure that abusive damage to the state is avoided in the context of tax structuring. The IDW welcomes the European Commission’s objective to use digital technologies to combat tax fraud and to the benefit of companies with the present package of measures “VAT in the Digital Age (ViDA)” and to adapt the existing VAT regulations to business activities in the digital age.
Combating VAT fraud remains a high priority. For example, most recently, the European Public Prosecutor’s Office (EPPO) Annual Report 2022 stated that of the 1,117 investigations with a total estimated loss of approximately EUR 14.1 billion 185 proceedings are related to VAT fraud with an estimated damage of approximately EUR 6.67 billion (47%). Carousel fraud is the most profitable form of tax fraud, which, according to published
which, according to published data, causes annual tax losses of around EUR 50 billion. The so-called VAT gap, according to the European Commission’s VAT GAP Report 2022, amounted to Commission, the so-called VAT gap amounted to EUR 93 billion in 2020, or about 9% of expected VAT revenues. In the “Report on Measures to Improve the Combating VAT Fraud – Exploiting the Opportunities of Digitalization” by the German Federal Court of Audit from 2020 states with regard to methods for combating VAT fraud that the analog instruments are not instruments are not sufficient to effectively combat digital VAT fraud. As an effective measure against VAT fraud, the report mentions the report mentions real-time electronic monitoring, the prerequisite for which is the use of electronic invoices. This corresponds also the assessment in the tax literature.
Against this background the measures envisaged in the VIDA package on digital reporting requirements and e-invoicing are basically suitable for combating VAT fraud in the form of cross-border carousel fraud.
It is crucial for the effectiveness of the measures that the data to be provided by the companies is used efficiently across borders by the tax administrations of the Member States in order to promptly identify and counteract any irregularities that may indicate VAT fraud. The achievement of the desired goal requires – in addition to the taxpayers, the achievement of the desired goal requires the use of financial and human resources for the establishment of a corresponding (IT) infrastructure for the evaluation of the data on the part of the tax authorities of the tax administrations of the Member States. An isolated imposition of of new obligations on the part of taxable persons cannot contribute to the fight against VAT fraud and does not promote cooperative interaction between taxable persons and tax administrations.
With regard to the concrete measures, we would like to point out that the timetable seems very ambitious. For example, according to the proposed Directive, electronic invoicing will be established in Art. 218 of the VAT Directive as the standard procedure for issuing invoices. With the planned elimination of Art. 232 of the VAT Directive, it is already foreseen as of 01.01.2024 that every entrepreneur will be able to issue electronic invoices. This applies regardless of whether the member state has already introduced an e-invoicing obligation or not. Conversely, this would mean that
all companies would have to be able to receive (structured) e-invoices and process them with their IT systems as early as January 1, 2024. This will present small and medium-sized companies in particular with major challenges.
Furthermore, we would like to suggest reconsidering the deadline of two days for issuing invoices for intra-Community supplies pursuant to Art. 138 of the VAT Directive and supplies and services for which the recipient is liable for the tax pursuant to Art. 194 and 196 of the VAT Directive should be reconsidered. Against the background of the desired fight against fraud through the use and analysis of data made available in a timely manner and analysis of data provided in a timely manner, a short period for invoicing and subsequent fulfillment of the obligation to report to the tax authorities is understandable and necessary. The planned intervention in the invoicing processes of processes of the companies does not (yet) appear suitable and requires further (time and further (temporal and factual) differentiation. In particular, in the case of complex deliveries or services where, for example, acceptance is required, such a shortened deadline will be virtually impossible to meet. This may also be the case if invoicing has been outsourced to an external service provider. It is also to be expected that the envisaged also be expected to lead to considerable conversion problems for small and medium-sized enterprises. Against the background of the disadvantages of the current system and the (late) timing of the transmission of aggregated data in the form of data in the form of aggregated reports, even a significantly extended deadline would lead to a significant improvement over the status quo. For example, reference should also be made to the Italian regulation according to which invoices are deemed to have been issued on time if they are issued within twelve days of the days after the transaction is performed and transmitted to the Sistema di interscambio.
Also, the planned ban on summary invoices by deleting Article 223 of the VAT Directive also represents a significant interference in the invoicing processes of companies and will lead to a multiple increase in the number of invoices to be issued. This is all the more true as the abolition of collective invoices according to the draft applies independently of digital reporting for all transactions.
With regard to the planned regulations for updating the VAT rules in the area of the platform economy and the only VAT registration in the EU, we would like to note that these are fundamentally to be welcomed from a systematic point of view. The measures serve to take into account the special features of the platform sector from a VAT perspective and to reduce the need for multiple registrations.
In summary, with regard to the planned package of measures “VAT in the Digital Age”, consideration should be given to keeping the new burdens for taxpayers as low as possible. This should be taken into account in particular against the backdrop of the very ambitious plans from a time perspective. On the one hand, the planned measures will lead to far-reaching interventions in the invoicing process. The measures envisaged will lead to far-reaching interventions in the invoicing process and will also require extensive adjustments to the IT systems.
It is essential that the proposal for a directive COM (2022) 701 does not differ from the proposal for a regulation COM (2022) 703. Because in order to objectives, it is imperative that the national administrative authorities use the information provided to them by taxable persons in the context of the reporting obligations into the planned central electronic system for VAT information and to the information collected is also analyzed and used in a timely and targeted manner in order to used to detect VAT fraud.
Without implementing the challenging IT technical and organizational measures on the part of tax administrations, the measures to be taken by taxpayers would largely come to naught and not lead to a significant come to nothing and would not contribute to a significant fight against VAT fraud.
Finally, in the event of the implementation of the measures of the “VAT in the Digital Age” package, we would like to ask for a review of which of the measures imposed on taxpayers in the past to combat VAT fraud have become obsolete and should therefore be repealed.
We would be grateful if you would take our comments into account in the further consultations. We would also be happy to explain our comments in the course of a personal discussion.
We will be happy to answer any questions you may have.
Source IDW Institut der Wirtschaftsprüfer in Deutschland e.V.
Input by other organizations into the public consultation
- EESPA
- InHouse Tax Forum (Belgium)
- Italian Banking Association (ABI)
- ETNO/GSMA
- DATEV eG
- Siemens AG
- Sovos
- EuroCommerce
- Inter IKEA Group
- FedEx Express
See also – The Library of VAT in the Digital Age (VIDA)
Join the LinkedIn Group on ”VAT in the Digital Age” (VIDA), click HERE
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