The digital age is rapidly transforming the relationship between tax authorities and taxpayers. Tax authorities are increasingly relying on digital means to gather and analyze tax data. The move towards embracing digitization is allowing tax authorities to collect tax data in real time. The information collected can also be used to identify non-compliance risks. One of the examples is the electronic invoicing, which is a mandatory model in Latin America.
Electronic invoices’ systems are unique, secure and comprehensive databases since they follow a pre-established format and include a digital signature to ensure the information integrity and authenticity. It is a way for the tax authorities to control tax evasion and cross-check consistency on inputs and outputs records. Every time an e-invoice is issued, it is automatically declared to the tax authorities.
Chile was one of the first countries in Latin America to implement electronic invoicing. It was voluntary in Chile until 1 February 2016 for large and mid-size companies and until 1 February 2017 for micro businesses. Although Chile was one of the first movers, Brazil and Mexico have overtaken Chile due to strict mandate for its usage.
The Federal Administration of Public Revenues (AFIP) of Argentina started its electronic billing system in April 2014; seven years after the electronic invoicing system began. It is a mandatory system for a certain group of businesses at that time. AFIP expanded the mandatory e-invoicing regime for all VAT-registered businesses in 2016. The electronic invoicing system defined by the AFIP is based on the declaration of an XML file with a series of mandatory tax data and implementation of electronic signature.
Electronic invoicing allows control of non-compliance through risk analysis techniques using a large volume of provided data. Like any other digital solutions on tax governance, electronic invoicing leads to the revitalization of the economy as well as transparency and economic benefits for the tax authorities.
It is also beneficial for taxpayers in the form of administrative modernization as the electronic invoicing can be integrated into accounting and business management systems. This results in lower administrative and data storage costs and a significant improvement in the security of transactional and accounting information.
Such wide use of electronic invoicing and subsequent data analytics serve as a useful example for other countries striving for compliance improvement. Therefore, European tax authorities (including Denmark, Sweden and Netherlands) are now participating in training organized by South American countries
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