Digital Europe: Digitalization Should Support, Not Hinder Taxation

Digital Europe: Digitalization Should Support, Not Hinder Taxation

“It used to cost money to disclose and distribute information. In the digital age, it costs money not to.”
~ British-American Journalist Heather Brooke

According to a report by McKinsey, despite rapid consumer adoption, Europe is operating at a low digital intensity: functioning at only an estimated 12 percent of its digital potential, compared to the United States’ 18 percent. In addition, there is enormous variation between Europe’s countries: while France operates at 12 percent of its digital potential, Germany is at 10 percent, and the United Kingdom is at 17 percent.

The Mandate of Digital Europe

With digitalization of information so much a part of everyday life, in 2009, Digital Europe was formed to represent the digital technology industry in Europe. The organization’s stated mission is to foster a business, policy and regulatory environment in Europe helps realize the goals of the digital technology industry.

Members of Digital Europe comprise 60 corporate members and 37 National Trade Associations from across Europe, including the world’s largest IT, telecom and consumer electronics companies from every part of the continent, such as SONY, Amazon Web Services, Microsoft, Google and Intel.

McKinsey predicts that accelerating digitization could add trillions of euros to economic growth in less than a decade. What would that mean for taxation?

Taxation in the Digital Age

In its Comments on EU Directive Proposals regarding Fair Taxation of the Digital Economy, Digital Europe argues that international corporate tax frameworks are not up to date, as the current tax legislation is built on traditional business models and does not take into account the effect of digitalization. The organization believes that the OECD member countries should determine the taxation rules and regulations on the digital economy, stating that, “international consensus is needed to achieve an international tax framework fit for the 21st century that nurtures technology and innovation, supports the skills and jobs it requires and maximizes the growth potential of the digital single market.”

The organization lobbies for taxes linked to profit, not revenues, and argues against double taxation. Digital Europe wants to see a uniform solution for taxing digital services, recognizing that incompatibilities in global taxation systems drive greater risks for fraud. Instead, Digital Europe wants digital technology to be viewed as an opportunity in the tax realm. Digitalization enables the automation of taxation procedures, using solutions that minimize fraud, and leads to significant savings for both the tax administration and the enterprise.

Advantage of EU’s online revolution: Digital VAT

Governments have long recognized the need to reform burdensome tax compliance procedures, specifically the introduction of online systems. In Europe, governments have focused on VAT as a first step in implementing a system of digital taxation.

In 2005, the OECD created a universal electronic format that businesses in any of its 38 member states could use for VAT filing. France, Luxembourg, Austria, Poland, Portugal and Lithuania have already adopted the system. The Netherlands and Belgium have each implemented their own online VAT formats. Electronic VAT filing is also available in Italy and Spain. The recent UK’s Making Tax Digital MTD) initiative is currently being piloted, aimed at making tax reporting easier for businesses in the UK. Digital VAT returns are expected to be required from 1 April 2019, with other taxes to follow in 2020.

The digitalization of VAT filing has also enabled the automation of VAT recovery. Using digital platforms, enterprises can stream compliant data from all VAT receipts and submit VAT reclaims to the relevant authorities. Implementing an automated VAT recovery platform ensures data integrity, better governance and compliance, and higher levels of visibility. Most of all, automating VAT recovery drives significant cost savings and boosts the bottom line.

To learn more about how VAT automation can help your business, contact VATBox. VATBox has successfully streamlined the VAT recovery process, providing businesses and financial institutions with unrivaled visibility, compliance and data integrity. Leveraging the cloud and utilizing full automation, VATBox exhibits complete control of a company’s VAT spend, while making the recovery process more productive and yielding higher returns. To learn more about how VATBox’s AI-driven solution can help your company thrive in today’s complex financial times, request a free demo.

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