Fiscalization in theory and practice

“While digital transformation can create new challenges for tax administrations, it also: makes new tools available to improve tax compliance, reduces administrative burdens on taxpayers, and helps to support growth.” The opening sentence, taken from the OECD paper on online cash registers, pretty much sums up the main considerations regarding fiscalization rules, a somewhat novel term defining the cash registers’ regulatory framework. In another sense, fiscalization is an effort to put business operations, and their turnover, under efficient control – it represents the utilization of the tax collection system, with the help of various secure systems.

In general, businesses were obliged to track the receipt of sales payments in their electronic cash registers, usually performed locally and sometimes with minimum (and often outdated) requirements. However, the decades-old offline standard proved ineffective in combating VAT fraud, allowing the possibility of tampering with (amending or even omitting and concealing) the locally-stored records. On the other hand, online cash registers connected to the dedicated processing system, usually sanctioned and maintained by the treasury department, should allow the tax authorities to track payments in real-time. By enforcing mandatory transaction reporting, authorities are essentially bound to have greater control of the money transfers and transaction flows. 

In effect, the new rules are intended to reduce the extent of the grey economy in cash-based business sectors, making it more difficult (if not impossible) to manipulate cash register systems. Needless to say, fiscalization efforts are closely linked to the worrying VAT gap, and authorities are implementing new regulations in order to enforce tighter tax compliance. Newly introduced regulation also provides better and more effective opportunities for control and inspection.

Just a few years ago, it was impossible to imagine online cash registers operating flawlessly. Nowadays, with the proliferation of the mobile internet (from 3G onwards), various fiscalization methods with different operational procedures seem economically viable and easy to implement, regardless of whether the country is developed or developing. The latter ended up at the forefront of the drive towards fiscalization – Argentina introduced mandatory electronic cash registers and fiscal printers at the end of the last century, while countries like: Croatia, Slovenia, and Hungary became the front-runners in Europe. Developed countries are quickly following suit, for example, as of the next year, all cash registers in Germany will be protected by a certified technical security module. The forthcoming rules stipulate the electronic record-keeping system in order to store and protect cash register transaction data.