Robbert Hoogeveen – Freelance SAP TAX Consultant & Functional Design Expert | Netherlands
  1. Hi Robert! Thank you that you have agreed to talk about tax technology. I know, that you have great knowledge and many years of experience in incorporating technology into taxes. Could you please tell our Readers a bit more about yourself: your career, your current role?

 

  1. Thank you for that introduction. Let’s deep-dive into tax technology topic. I believe, that we can stick to indirect taxation (VAT), as that is a tax, which technology has the biggest impact on. I would like to discuss some particular areas. We know, that without correct input (source) data, automation of VAT reporting might be unsuccessful. How to ensure correctness of VAT determination of sales and purchase transactions? Usually, sales side VAT application is (at least to some extent) automated, based on flows, product categories etc. More issues appear on purchase side. VAT coding of AP invoices is still manual process, quite often. What is your view here? What are the biggest challenges in VAT determination, especially in case of purchase invoices? Is it complexity of business models of big organizations? Maybe different templates of invoices which make OCRs less efficient? Last but not least, what is your prediction for the future regarding this area? Will for example e-invoice clearance model, like SdI in Italy, “kill” OCR and enable companies to finally automate VAT determination process? As most of data relevant for VAT determination will be in single standardized structure.

 

  1. Once we have source data, we need to produce different VAT reports like VAT return or ECSL (recapitulative statement). Also, Intrastat reporting is usually in the scope of tax team responsibilities, although that is not fully VAT related report. I know, that even some really big organizations rely on spreadsheets as a “solution” for VAT reporting. However, more and more companies invest in technology enabling automation of generating VAT reports. What is your view here? Do you consider that external reporting tools (examples: OneSource by Thomson Reuters, Avalara products) are best option for automation of VAT reporting? Also, most of those tools provides built-in quality checks on correctness of VAT data, what makes them more attractive. However, on the other hand there are a lot of issues which may appear during implementation of such solutions. Due to different reasons: bad quality input data, what we discussed, various ERP systems which big organizations may use, not standardized and not harmonized VAT process.

 

  1. Thank you. I would like to discuss separately new VAT reporting requirements. They are spreading across Europe (and not only), just to name some of them: SAF-T, SdI (Italy), SII (Spain), Control Statement (Czech Republic), RTIR (Hungary). All of these obligations are extremely detailed and need to be submitted to tax authorities in strictly defined structure and format (usually XML). Considering that, countries are moving towards real-time reporting it seems to me, that external reporting solutions (like discussed above) may not be efficient in case of those type of reporting. The reporting should be directly from ERP system, for instance SAP. Do you agree with this view? What is the best solution to enable new reporting requirements? Are so called SAP add-ons one of most recommended options?

 

  1. Apart from meeting VAT reporting requirements, which is the priority for businesses, I can see that currently more and more organizations consider investing in analytics solutions. It seems to me a natural consequence of reporting on very detailed level. We have a huge amount of data, which – apart from reporting – might also be a great source of data for analytics tools. Tax/ finance managers have an insight on various VAT areas, very often in attractive looking form (dashboards). If we also apply machine learning, AI and all these new, trendy concepts companies may for instance predict some future tax implications. Is it already right time to think about investing in analytics tools? Do you think, that for example AI may help in VAT area? Or is it still too early?

 

  1. Thank you for this extensive answer. Now, I would like to discuss more general topic. We all understand, that introduction of new VAT reporting requirements is caused because of significant VAT frauds. Tax authorities believe, that detailed VAT reporting can decrease VAT gap, by for example automation of so-called cross-checks (whether a supplier reports same VAT data as a buyer). Do you think, SAF-T or real-time reporting are best solution for preventing VAT frauds? Should countries consider also other solutions like split-payment mechanism, which some time ago has been introduced in very wide scope in Poland?

 

  1. Also, EU Commission has presented the concept of so called “VAT Definitive System”. The proposed changes are revolutionary. Zero rated (exemption with credit) intra-community supply of goods in the country of goods dispatch and intra-community acquisition of goods taxable in country of goods arrival, will be replaced by single intra-EU transaction. That one will be taxable only in the country, where the transport of goods ends. The revolution is that 0% supply will be removed and the supplier will need to issue the invoice with appropriate VAT rate, applicable in the country of destination. We know, that all carousel frauds are using the “benefit” of 0% cross-border supply. Probably, that fraud will be eliminated but will other different ones appear? Last but not least, all above changes would require significant changes in ERP systems, technology solutions and so on. Do you think, that implications on taxpayers, due to changes in regulations are too big? Financial, but also, for instance in accounting/ tax processes.

 

  1. Thank you. Last question, but important one. Based on your experience, what advice can you give to organizations in order to apply tax technology in most efficient manner? Considering constantly changing VAT environment, new reporting requirements which need to be reflected in ERP systems, how to be up to date with everything? And ensure that required changes are made. Whose role should be underlined? For example, do you think, that organizations should hire more employees with mixed skills: broad tax knowledge but also in-depth understanding of IT impacts of tax regulations, changes?