The VAT Gap in the EU was estimated to be €159.5 billion in 2014, and the enormity of that gap is one of the reasons why the global tax landscape is changing so dramatically.
Sovos explained this development to attendees of the FD Exchange conference, which took place in the Steigenberger Airport Hotel in Amsterdam. The two-day conference brought together senior finance professionals to discuss the business challenges they faced and which tools and solutions they planned to invest in to meet those challenges.
Sovos used the event as an opportunity to show the audience how the tax landscape was changing but more importantly, why – and what steps companies should be taking to prepare for these changes. Here are three takeaways:
1. Governments are closing the tax gap. The European Commission estimates the difference between what its expected VAT revenue is and the amount actually collected is the equivalent of a total revenue loss across the EU of 14.03%. The EU has since begun to adopt a tougher approach, implementing technology to increase reporting efficiency and accuracy, reduce costs, improve cash flow, reduce tax fraud and share more data with other tax authorities.
2. Latin America is leading the way. Governments in Latin America have been spearheading the e-invoicing movement for years, and their efforts are paying off. Brazil has seen its tax revenue increase by $58 billion by plugging its leaks in invoicing and reporting. Mexico has increased its tax collections by 34 percent since rolling out its e-invoicing requirement. A feasibility study carried out by the Colombian government estimated Colombia could reduce tax evasion by 50 percent and increase revenue by $8 billion by implementing an e-invoicing mandate. These successes are serving as examples to EU governments looking to crack down on possible tax evasions and maximize their revenue.
3. The global tax landscape is evolving. The shift to technology solutions is gaining steam around the world, and the time is now to implement strategies that address this unprecedented trend. Companies need to decrease costs, simplify operations and acquire new capabilities to remain compliant with new regulations.
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