The first iterations of mandatory e-invoicing happened in the early 2000s when a number of European and Latin America governments introduced the process of electronic procurement. The systems used back then: varied, usually operated within closed networks, lacked interoperability and were riddled with inefficiencies. It became clear that a standard needed to be developed, which led to a common framework simplifying e-procurement across borders. The framework, established in 2008, was named PEPPOL (Pan-European Public Procurement On-Line), with the overall objective to enable businesses to communicate electronically with all their European counterparts (during the procurement process), to increase efficiency and reduce costs.
A decade later, the Australian and New Zealand Prime Ministers made a joint statement reaffirming “commitment to jointly pursue common approaches to e-invoicing”, with the intention to adopt the PEPPOL interoperability framework in order to increase opportunities for businesses to integrate with the global trading environment. It is one of the latest moves in a far-reaching initiative towards mandatory e-invoicing, which provides benefits both for users and tax authorities.
Governments are increasingly leveraging technology to strengthen the collection of indirect and customs taxes, looking for efficient auditing and enforcement. E-invoicing is being mandated by governments and jurisdictions in their efforts to track and ensure indirect taxes and customs regulation.
According to Richard Ainsworth, a professor at Boston University School of Law, the number of countries considering an e-invoice mandate grows by the day, and the pattern of “digitally signed invoice sent to the government” will soon become universal. However, evolution doesn’t have to be slow or gradual. Ainsworth points to some specific experiences, like Rwanda “going fully digital”, registering a double-digit revenue increase in a single year. “E-invoicing is necessary to control fraud,” Ainsworth adamantly stated, “with tax considerations driving the process, and the exchanges anticipated in anti-fraud measures accelerating it.”
In addition, regardless of the specific requirements in any given country, the companies will face mounting pressure to implement e-invoicing amid a growing tide of adoption by industry partners in countries and jurisdictions where it is a requirement. Sooner or later, uniformity will reign supreme. Meanwhile, steep consequences for noncompliance are being announced with mounting frequency. According to KPMG consultants’ ruthless assessment, a company’s long-term survival hinges on its ability to feed jurisdictions a steady, accurate supply of data, in real-time, while satisfying indirect tax and customs requirements along the way.