Every year trillions of dollars are lost to improper VAT recovery reporting processes worldwide, which means that both governments and businesses are losing a substantial source of easily recoverable income. It has come as no surprise that countries such as Italy have begun to introduce VAT technology into online tax reporting processes so that the recovery of VAT can become much more streamlined and efficient. A move towards ingrained VAT recovery in the government tax model, and in businesses, means that compliance requirements will change, businesses must adapt, and reporting methods must be institutionalized.
Real Time VAT Reporting
Until recently, most countries (especially in Europe and Latin America) were using a post-audit system for managing invoices which could then be shared amongst business partners. However, this created a large paper trail which tended to lead to VAT leakage and improper compliance. This meant that governments were potentially losing a lot of money, and businesses could potentially be misfiling amounts in order to save. Now, governments are beginning to use a real time reporting model in which all VAT invoices are filed electronically, instead of reported post-travel to the business, and then filed with the appropriate government body.
There has been a vast discrepancy in what is due and what is actually collected VAT-wise. Therefore, it is not surprising that state governments are looking at ways in which to effectively collect VAT and ensure that they are receiving the requisite amount. The issue that is going to arise as countries start to overhaul their collection system from an audit-based model to a real time online model will be that regulations and tax laws vary from country to country. This will mean that international requirements will have to be accounted for and constantly adapted to. This leads to the question of whether or not business to business VAT recovery on an international level should be performed by the business and then reported to the VAT collection agency, or if the government collection agency itself should be in charge of compliance on both the state and international level.
Changing Compliance Requirements
In order for businesses to comply with new VAT recovery processes, governments must have a set technology that they are using in order to facilitate the process and create ease of access. E-invoicing seems to be the chosen mode of reporting; however, problems can occur with this reporting mechanism if it is not uniform amongst businesses and the government. There is a variety of software which can be used for VAT calculation and collection, but if every business is using a different one, including the government, the margin for error will only increase. If countries want to create a static method in which VAT regulations can be complied with, then they must institutionalize a single program for collection online.
Adapt and Report
Once a country has settled on an effective means of VAT recovery, and businesses have begun to follow the e-invoicing process dictated by this, they must adapt their own internal processes. As mentioned, this can cause some internal shuffling as new compliance and reporting mechanisms must be met. It is for this reason that many businesses have adopted automated VAT technology that updates itself to be in compliance with new regulations.
The current regulatory landscape surrounding VAT reclaim is confusing. However, if the proposed system is followed by both businesses and the government, and a uniform infrastructure is adopted by all than the recovery process itself should be beneficial for all parties involved.
Automated VAT Processing
VAT recovery technology is another great travel tool that business travelers have begun to utilize, as have their employers. Once the information has been input for all of the travel expenses, it is quickly able to calculate how much the return should be, and then automate the entire process. This means that all expenses are quickly audited and assessed for the maximum VAT claim. Automated VAT recovery is something that all companies with a large base of traveling employees should use in order to make sure they recoup the most amount of VAT possible, and thus save on travel expenses.