Digital tax administration: how did the e-invoice and "Tax Administration 3.0" come about?
From the paper tax return to the e-invoice checked in real time. The newest stage in the history of taxation, Italy's experience and the OECD concept in short key points.
In ancient Egypt the tax scribe saw the harvest with his own eyes and wrote it down. In the 21st century the "scribe" has become a server: as soon as an invoice is issued, the tax authority sees it.
- The problem. The VAT chain relies on invoices. A paper invoice is easy to forge or hide, while checking it is slow and expensive.
- The idea of the solution. The invoice is sent from the seller to the buyer not directly but through a state platform. The platform registers it and the tax authority sees the data immediately.
- Italy's experience. Italy was one of the first in Europe to make electronic invoicing between businesses (B2B) mandatory: from 1 January 2019 invoices pass through the tax agency's SdI (Sistema di Interscambio) platform. The main aim was to reduce tax evasion.
- Step by step. In Italy, before the B2B obligation, e-invoicing was tried out in public procurement (B2G).
- The OECD concept. On 8 December 2020 the OECD Forum on Tax Administration published the "Tax Administration 3.0" report. It says that, over time, paying taxes should become a "seamless and frictionless" process that is built into businesses' ordinary systems.
- A long road. The report itself stresses that this change is a journey of many years and that many pieces have to fit together.
- What it means for the accountant. An invoice is no longer just an internal document but data shared with the tax authority. There is less room for "I'll fix the mistake later", so checking before the invoice is signed becomes more important.
The 1980s, the 2000s and today: how has tax administration changed? The OECD divides this road into three stages: the paper era, electronic administration ("Tax Administration 2.0") and digital transformation ("3.0"). The table below shows the general direction; the exact years differ in each country.
| Process | 1980s | 2000s | Today |
|---|---|---|---|
| Tax return | A paper form, filled in and submitted by hand | Electronic filing via the internet becomes widespread | Electronic filing is the norm; in many countries part of the data is pre-filled |
| Invoice | Paper, in both parties' archives | E-invoicing voluntary or as a pilot | Mandatory through a state platform in a number of countries |
| Retail receipt | A simple cash register or a handwritten receipt | Cash registers become computerised | In some countries online cash registers: receipt data is sent to the tax authority automatically |
| Audit | Leafing through documents by hand | Selective checks on a computer | Automatic data matching and risk analysis |
| The accountant's main job | Writing, calculating, copying | Entering data in software and producing reports | Controlling data quality and analysis |
Example (prepared by the author, hypothetical). The "Navro'z Mebel" company sold a table to a shop and issued an invoice. In the paper era this invoice might have been looked at months later, during an audit. On an electronic platform it is registered as soon as it is sent: the shop confirms or rejects it, and the tax authority can match the data of both parties. If the company "forgets" to include the invoice in its return, the mismatch shows up automatically.
See also
Sources
- European Commission: eInvoicing in Italy · the B2B e-invoicing obligation from 1 January 2019, the SdI system
- EY Global Tax News: Italian budget law introduces mandatory e-invoicing
- OECD: Tax Administration 3.0: The Digital Transformation of Tax Administration (2020) · published on 8 December 2020; the idea of making taxation a "seamless and frictionless" process
- Example · prepared by the author, hypothetical