New research from VATGlobal, has found that businesses are struggling to understand new systems such as Making Tax Digital, with the European tax landscape in the midst of a digital transformation.
Governments across the region are taking Latin America’s lead and implementing electronic taxation systems, as well as beginning to shift to real-time rather than periodic models, with the intention of both simplifying tax’s traditionally paper-based reporting system and cumbersome processes and enhancing compliance to address the tax gap. However, developments have not been universal and a patchwork of regulations is fuelling confusion and complexity.
VATGlobal carried out research looking into the VAT challenges faced by businesses across the UK, Germany and Sweden, for its new whitepaper ‘Meeting the challenges of a changing tax landscape’.
Key findings from the research included:
- 46% of companies across the UK, Germany and Sweden are not confident about complying with the various real-time e-invoicing controls implemented across Europe
- Nearly half (46%) of European organisations said they were not confident in e-invoicing compliance due to a lack of experts and resources
- 51% expect no investment in internal VAT functions in 2020 \
- 46% don’t possess an internal VAT expert and 23% search the internet for advice
- 29% of UK firms ranked ‘real-time reporting’ as the most pressing issue.
Andrew Donald (CTA, IIT) – Senior VAT Consultant at VATGlobal, commented, “VAT specialists can be seen as an expensive luxury for some small businesses. Unsurprising, when resources are limited, they are focused on business-growing activities, meaning VAT is just not seen as a significant issue. It’s transactional, it’s simply an ‘in’ and an ‘out’ on invoices and other financial documents.
“However, the increasing emphasis on self-assessed – rather than tax authority-led – compliance means that VAT accounting and reporting requirements are more complex and time-consuming for all to comply with. The problem is exacerbated for companies that operate internationally, as many small businesses do, with it meaning that they have to proactively manage the country-specific reporting processes with numerous tax authorities. That’s difficult to do without dedicated resources or internal knowledge.
“Therefore, the challenge for many small businesses is the trade-off between the known costs of compliance against the unknown cost of non-compliance, and that’s a gamble that can lead to spiraling fines. When organisations have streamlined access to learning portals and digital resources, it’s much more straightforward for them to understand how VAT regulations change across borders, and how to comply with them.”