“If Belgium’s government were to promote e-invoicing among its own suppliers, that would be precisely the incentive that a whole bunch of businesses need to make a start on it themselves,” argues Ine Lejeune, Global Leader Indirect Taxes and Taxman of the Year in 2009. Businesses save money with e-invoicing. The potential for savings in Belgium is roughly 3 billion euros for the 1 billion invoices that Belgian businesses send out. Paper invoices cost around 4 euros, whereas an electronic one entails a cost of around 1 euro. The government is well placed to play a stimulating role. A whole lot of businesses don’t make a start on electronic invoicing because they don’t have enough customers that can deal with e-invoicing. The public sector counts for an average of 15 to 18%* of all purchases in a given country. Forty-five to 65%* of all European companies are suppliers to the public sector (*source: Billentis). In other words, if the government were to ask all its suppliers to invoice electronically, that could just tip the balance.
“Additionally, the government also gets a benefit in return,” continues Lejeune. “In fully automated systems, there is less chance of human error. In any case, companies that invoice electronically have fewer collection costs because the data is more accessible for carrying out e-audits. It’s a win-win situation, therefore, and saves significant amounts of both time and money as a result of improving these business processes – a very hot topic in times of crisis,” says Lejeune.
In the fight to survive the present financial crisis, the European Council has recently decided to take accelerated action to secure further economic and job-creating growth. This specifically means that the focus has to remain on implementing the ‘2007 Action Programme for the reduction of administrative burden’, with a target of a 25% reduction in the administrative burden by 2012. The European Commission is being asked to continue its work on proposals to simplify regulation. The Member States must ensure that country-specific recommendations are fully transposed into national decisions.
In 2010, a new European directive was issued on electronic invoicing: Directive 2010/45/EU. Until no later than 1 January 2013 (the last date for transposition), businesses in the European Member States can choose how they implement e-invoicing. Paper and digital invoices are then treated entirely equally. In other words, electronic invoicing is made technology-dependent, with no choice in the matter. And indeed the same also goes for paper. The recipient still has to agree to receive electronic invoices. In that regard, companies can already work pro-actively by adjusting their invoice terms, for instance. In addition to guaranteeing the authenticity of origin and integrity of content, you (still) also have to be able to show that a transaction did indeed take place and that that is the basis for the invoice. How you evidence this depends on the course of your business. In practice, that means that you can still rely on technological aids such as EDI or electronic signatures, but you can also work with business controls such as ‘3-way matching’. As a result, depending on the business process from which the invoice is issued, you can use a regular .pdf or fax. This flexibility means that dematerialisation of invoices is also accessible to small businesses.
“Belgium is one of the best pupils in the European classroom,” says Pieter Breyne, Director Technology Consulting and one of the Belgian representatives in the European Multi-stakeholder Forum for e-invoicing. “Technology-dependency is already reality and Belgium was one of the first countries to set up a national e-invoicing forum. The job of the Belgian e-invoicing forum is to identify the stumbling blocks to introducing e-invoicing and find solutions for them, on the one hand, and, on the other, to publicise success stories as good examples and inform the market. The European Multi-stakeholder Forum for e-invoicing keeps the commission abreast of how e-invoicing is being adopted in the Member States.
“Belgium will even be leading the first activity undertaken in the European Multi-stakeholder Forum,” continues Breyne. “What this then specifically involves is monitoring e-invoicing adoption in the EU Member States. But the government could go much farther by starting pilot projects up. From within the Business-to-Government work group of the Belgian e-invoicing forum, we try and motivate government agencies as much as possible to make a start with e-invoicing at the earliest possible opportunity. In addition, it would be a welcome thing to have clarification of the taxman’s standpoint on e-invoicing by means of a formal practice note. Not even following on from the previous directive has there ever been a formal practice note, and that hardly favours transparency and confidence,” concludes Breyne.
E-auditing boils down to providing the data needed for an audit using the ‘Standard Audit File for Tax’; electronically, in other words. Belgium has embarked on this but is still in the research phase. “Here, too, standardisation at a European level would be very useful,” Lejeune thinks. “Ultimately, a number of countries, including Belgium, are now all working in their own corners to define such a file, but a uniform approach, at least in all the European Member States, would again have cost-saving effects for businesses. Here, too, we call on the European Commission to create a common European framework based on the OECD standard, just as they did for electronic invoicing.”
A good many countries are looking with interest at Europe’s initiatives in relation to e-invoicing. Everyone is interested in the potential cost savings and the initiatives for achieving them. At an EU level, no less than 240 billion euros could be saved over six years if full invoicing process were to be digitised (source: EACT). At present, 15% of these invoices are sent electronically.
Denmark, for example, is even now issuing calls for 100% of invoices to the government to be e-invoices. In practice, the country already made electronic invoicing to the government compulsory in 2005. However, 30% of suppliers do not send out electronic invoices directly but pass through a so-called ‘scanning agency’. The government is now going to be working intensively to also get those 30% of suppliers to issue direct electronic invoices. The Netherlands has set itself the target of having e-invoicing for 10% of all government contracts. And Portugal is starting with e-tendering, in which everything is done electronically as well. The European Commission is increasingly requiring suppliers to invoice electronically under framework contracts.
Some countries are going for technology-dependence, others are imposing rules, such as Russia and Brazil. In Brazil, e-invoicing is compulsory. A signed XML file together with a file containing normally readable content have to be sent to the Ministry of Finance for validation and consent. Russia is currently in a test phase. There, an electronic invoice is a file with an electronic signature via a provider. An interesting example is to be found in South Korea. E-invoicing has been compulsory there since the beginning of this year for business transactions subject to indirect taxes. Businesses pay more if they hang onto paper for the invoicing process. This is logical, since it also costs the authorities more to do audits. Even a country like China is looking at Europe with interest. The Chinese processes are fairly similar to typical electronic processes but continue to require paper for the present.
“It’s worth noting that PwC has been active in the field of electronic invoicing for no less than 15 years and plays an active part in defining the rules for e-invoicing in Belgium, Europe and even farther afield,” explains Christoph Zenner, Indirect Taxes Partner at PwC. “Given this breadth of experience, it is very clear to us that the uptake of electronic invoicing is rising exponentially both within the European Union and elsewhere. At a conference we recently organised on e-invoicing and e-archiving and all the attendant processes, we had no fewer than 211 attendees representing virtually every continent on earth. Clearly, if the government were to bolster these developments with a couple of stimuli, this would ensure that the savings potential is realised fast and in full,” Zenner concludes.