Why Accountants Need to be Aware of Tax Compliance

16/09/2022

Where does the role of the accountant fit in global mandatory e-invoicing and tax compliance regulations? We tackle the question in our webinar ‘Why Accountants Need to be Aware of Tax Compliance’ as part of our Navigating Global Tax Compliance webinar series.

Take a look at an overview below and watch the full webinar recording here.

 

The VAT gap challenge: How European countries are reacting

Governments across Europe are actively looking into mandatory electronic invoicing (e-invoicing) and tax compliance. This is due to the large VAT gap affecting all European countries. The VAT gap is the difference between the VAT revenue expected and the VAT amount collected. An amount which is increasing at a large rate:

  • 2018 - VAT gap across Europe was €140 billion (more than 10% revenue loss)
  • 2020 - Expected VAT gap is around €164 billion
  • 2022 - Expected VAT gap predicted to be around €180 billion

In 2019 the Italian government introduced mandatory business e-invoicing to tackle their large VAT gap.

By the end of 2019, Italy’s VAT gap had already reduced by €3.5-4 billion. The Italian government was able to generate a lot of recovered revenue. Other European governments started to take notice, especially even more so following the COVID pandemic and now the energy crisis.

Governments need the cash to invest in their local markets to help keep their country’s businesses afloat. Which is why governments are turning to mandatory e-invoicing. E-invoicing provides governments more control over business activity. More control means more visibility over the VAT expected and declared, therefore reducing the VAT gap.

 

Tax compliance models: Where does the accountant fit?

Governments have started to look at the various ways of implementing mandatory e-invoicing. Numerous e-invoicing models exist around the world. Many governments are creating their own systems, formats and networks, all operating within the various models.

Importantly, in all these models the accountant is not part of the equation. Which creates many challenges for the accountant.

  • Extra manual work - The accountant has to manually download their clients’ invoices from the government platforms.
  • Paying service - The accountant has to pay an external service that downloads and communicates the accountant’s customers’ invoices to them.
  • Competition - Finally, there is a risk for the accounting profession. Non-accounting firms are developing cheaper “accounting solutions” that eliminate the need for the accountant altogether.

Therefore an accountant needs a solution in place that not only allows their customer to be e-invoicing compliant, but allows the accountant to still remain at the centre of their customers’ invoicing flows.

Accountants need to start acting quickly. The e-invoicing roadmap shows the many mandatory e-invoicing initiatives across the globe. European tax authorities have already announced that all member states must have mandatory controls in place by 2028. Many countries are reacting sooner, meaning accountants need solutions in place to make sure they fit into the equation.

 

E-reporting: Why accountants may need to act even quicker

Mandatory e-invoicing will also transform the task of reporting. Certain European countries are restructuring the task by, for example, moving away from monthly and quarterly VAT declarations to real-time electronic reporting (e-reporting). France is one of the countries aiming for mandatory e-invoicing and e-reporting by 2025.

E-reporting requires the business to report on more than just their total number of invoices. Rejected invoices, partially paid invoices, fully paid invoices etc. Such information is not typically available in most accounting software packages today. Therefore, accountants will need to have a solution in place that calculates this real-time business information.

 

The solution: An e-invoicing tool that centralises the accountant

Our Banqup solution puts the accountant in the centre of e-invoicing flows. Allowing the accountant real-time access to their customers’ invoicing information.

Banqup is designed for both accountants and their SME customers. For the SME, Banqup is a digital tool to manage invoicing, payments and admin in one place. For the accountant, Banqup provides real-time invoice and document access, making the likes of e-reporting a simple task. The accountant is fully involved in the entire document handling process and remains the central link between their customers, the governments and also their own ERP or accounting systems. 

Explore more about Banqup to understand how the accountant remains in control.