Tax authorities across the GCC region are evolving fast, enacting new regulations and mandates with short time frames for implementation. E-invoicing is one such initiative that we are seeing as a growing trend, as authorities around the world implement their own versions of digitised tax data collection and verification for clearance. Initially beginning in Latin America, this has expanded to Europe, where SAF-T has become an integral part of data to tax authorities. Most recently, it is now influencing authorities in Southeast Asia, Australia, New Zealand and now the Middle East.
The market for e-invoicing in its various forms has seen an exponential growth over the past decade, which is expected to increase even further as tax authorities are focusing their efforts on digitising interactions with the taxpayer. In the Middle East, we have already seen it implemented in Egypt, and the Kingdom of Saudi Arabia have recently announced their own regulations, effective from December of this year. Given the trajectory of tax trends around our region, we fully expect that e-invoicing and other automation mandates will be part of the standard across the rest of the GCC in the near future.
So what exactly is e-invoicing, and what does it mean for our region? Whilst it takes the form of different models across geographies, broadly speaking it is the digitised collection of data from the taxpayer, in a structured format, for the purpose of clearance. As a process, it excludes more traditional methods that might include hard or soft-copy documentation, and requires that the relevant data be submitted in a prescribed web-based format. This is a wholly new way of operating for taxpayers in the Middle East and will require a number of proactive steps to re-establish compliance. Initially, this will take the form of a thorough IT assessment for almost all organisations, which will enable a true understanding of any gaps, either technological or operational, and act as the foundation for a roadmap to remediation. For many organisations, this may be system reconfiguration, whereas others might require a more holistic approach to roles, people and larger technology strategy.
So why the shift? The digitisation benefits to a governing tax authority are clear; it is substantially cheaper for governments to leverage more digital solutions to bridge current data gaps, checking and validation processes, which will in turn help maximise tax revenues and be able to draw on analytical insights provided by higher quality and more robust data. This data can help authorities better understand the behavioral patterns of taxpayers, but can also enable easier, faster auditing, resulting in greater penalties for those who aren’t compliant.
There are also significant benefits that can be borne out of this for the taxpayer as well, not only on the invoicing (or revenue side) but also for Accounts Payable. The trend towards digitised interactions requires a new level of data organisation and management. With it, this can bring insight and analysis into an organization's own operations, drill down into efficiency and operational effectiveness, and even insights into customers and revenues.
The advent of new technologies also opens the way for even more advanced methods of data collection and tax retrieval from the authorities and e-invoicing, marks one step in an overall paradigm shift that could lead to holistic, real-time visibility of tax data and operations and nullify the need for a tax return. Given the advancement of technology within tax and finance and across the Middle East as a whole, we can expect to see smarter and more intuitive solutions being applied to the tax process and interactions with authorities. This could include the integration of new and innovative technologies such as analytical and automation tools applied to repetitive, rules-driven processes. It could also include Artificial Intelligence (Machine Learning) that identify patterns and make new predictions, or even Blockchain, the new democratised end-to-end transaction tracking of goods and services.
Despite its relatively recent adoption of tax, we can see that the Middle East is moving quickly and we expect the region to break new ground when it comes to taxpayer and authority interactions.
The one thing we can be sure of is that change isn’t just coming. It’s already here.
© Opinion 2021
Any opinions expressed in this article are the author’s own
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