E-Invoicing Successfully Reducing Tax Evasion Around the Globe

Mexico Sergey Novikov/Adobe Stock

There are a number of drivers motivating procurement organizations around the globe to adopt electronic invoicing solutions — from improving internal processes to responding to external pressures from suppliers and customers. However, as the new 2016 e-invoicing report from Billentis points out, tax evasion is a major reason both private and public sector organizations have switched. E-invoicing has also been successful at reducing corruption and tax evasion, too, according to the report.

In both Asia and Latin America, for instance, governments have launched country-wide e-invoicing projects with the aim of reducing tax evasion. With such programs, suppliers and buyers send invoice data in an electronic format to the country’s tax authorities to be validated and audited.

Latin America

Brazil leads the region and the globe with the highest penetration for electronics invoices in the business-to-business and business-to-government segment, with about 1.3 million businesses in the country issuing e-invoices, the Billentis report said. This is largely thanks to the “strict implementation” of the e-invoicing requirements the government instituted several years ago.

Mexico, too, has seen similar success with e-invoicing and is another leader in the market globally. The country is also expanding its e-invoicing requirements this year. Since 2013, companies and individuals in Mexico are required to issue e-invoices if annual revenues total $270,000, according to the Billentis report. However, starting this year, companies with revenues below this amount have to implement e-accounting.

E-invoicing enforcement in Mexico has been successful at preventing tax evasion, the report said.

“Besides efficiencies in the generation, distribution, archiving, collection and reduction in the use of paper, Mexico’s positive results in the adoption of e-invoicing and e-accounting have paid off in the reduction of tax evasion,” the Billentis report stated.

Much of Latin America has more mature e-invoicing markets than other countries around the globe due to government-led e-invoicing initiatives. This region is also home to some of the strictest legal requirements for e-invoicing worldwide, according to the Billentis report.

“Some low-hanging fruits have been picked and the government has achieved a significant reduction in tax evasion,” the report said.

Asia-Pacific

Tax evasion is a major challenge in the Asian-Pacific region as well, prompting countries like China to implement e-invoicing regulations. Chinese taxpayers, for instance, must register with tax authorities and create an account to use the online electronic invoicing system, which was set up to help curb tax evasion. The government also requires specific information on each invoice sent and requires it be issued online.

Australia’s e-invoicing system also has requirements that should help it reduce tax evasion and improve invoice accuracy in the country, the Billentis report said. The Australian government began pushing e-invoicing on a broad scale in 2015, according to the report. The Australian Digital Business Council plans to ratify a e-invoicing interoperability framework this month.

E-Invoicing: The Obvious Step

Though paper-based invoice management systems still exist around the globe, governments are having success in mandating electronic systems that provide tax authorities with higher levels of visibility into the transactions taking place within their countries. As the Billentis report pointed out, invoices provide the highest level of information for tax authorities among fiscal documents. Real-time or near real-time processing of invoice data therefore has led to major tax evasion reductions around the globe.

“As we see in a number of countries, these steps significantly facilitate a reduction in tax evasion,” the report said.

First Voice

  1. Anthony Ryan:

    The EU could learn a lot from the LAM success stories. This is an area where the EU would benefit from mandated standards with no scope for deviations at the country level. This should be rolled into the VAT simplification studies already underway…

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