I recently had the opportunity to connect with Christiaan van der Valk, Vice President of Strategy for Sovos, as well as the Chair for the Public Policy Working Group and Executive Committee Member of EESPA. We discussed how to keep your E-Invoicing compliant amid global compliance chaos. Christiaan will be giving a session on this topic on September 30th at the Exchange Summit Conference in Vienna.
Bob Cohen: Christiaan, thank you for taking the time to speak with me. Let’s get stated with your background and your current role with EESPA. A brief overview of EESPA would also be helpful for those not be familiar with the organization.
Christiaan van der Valk: My background is a little unusual: I have worked on global policy advocacy and best practice development in an international business organization (the International Chamber of Commerce) and then co-founded what has since become a well-known brand in embedded cloud-based compliance services. That company, TrustWeaver, was acquired by a global leader in the tax compliance space, Sovos Compliance, in 2018. This mix of a decade of working with regulators and top-level policymakers, followed by fifteen years of digital entrepreneurship has given me a unique vantage point from which to understand how businesses and governments are managing their respective digital transformations – and to help define models for constructive cooperation where these mega-transformations intersect, which is mostly in tax. Electronic Invoicing (eInvoicing) is a key and growing ingredient of that intersection. But eInvoicing isn’t a standalone process – it is part and parcel of a rapidly growing industry of cloud-based business transaction management platforms that offer standardized end-to-end processes for purchasing and order-to-cash processes. A thriving industry of service providers has developed to provide or support enterprises with such eInvoicing and other e-business document services. In Europe, the majority of vendors in this space are represented in EESPA. I sit on the EESPA executive committee and have the honor to chair its Public Policy and Compliance Working Group.
BC: Why is it important to be compliant and what can happen when organizations are not?
CvdV: No business is sustainable without adequate measures to be and remain tax compliant – it’s really as simple as that. This isn’t only because noncompliance can lead to penalties and other legal sanctions; your ability to provide the necessary data to tax administrations is a good litmus test for whether you are in control of your business administration generally.
BC: How are European and LATAM countries implementing real-time or near-real- time invoice controls?
CvdV: From what I can tell, the majority of EU member states already have, or are actively considering some form what we have started calling “continuous transaction controls”. This is obviously inspired by the successful implementation of ‘clearance’ e-invoicing in Latin America, but the thing that creates additional challenges in Europe is the diversity of – sometimes overly – creative approaches. The end goal appears to be a system like Chile, where the tax administration has turned the table on taxpayers: there are no more periodic reporting requirements and the tax administration sends you your ‘e-assessment’ statement based on data harvested from live business transactions. However, many European countries are starting this journey not by changing the rules for invoicing but by making VAT reporting more frequent and the reports more granular. This includes things like SAF-T reporting, which creates new types of challenges for European and international businesses.
BC: What‘s really going on globally and what can we expect in the coming years?
CvdV: The trend towards real-time transaction controls will spread like wildfire, multi-national companies will especially be under huge pressure to keep up with a growing patchwork of rules which contradict their desire to use modern IT for global standardization, business intelligence etc. What we’ve seen so far is just phase 1 of this global rollout, as even countries like Mexico, which have had clearance eInvoicing for almost a decade, state they have barely gotten started with the AI-powered analytics they want to apply to the gigantic data lakes they are collecting from every B2B, B2G, or B2C transaction in real time. Governments will have access to unprecedented levels of insight into pretty much all aspects of their economies. Among other things, these insights will also be used to tighten the screws on multinational companies in terms of direct tax optimization. We’re actively trying to coordinate these government and business investments in automating the global economy, but diversity will get worse for at least the coming decade before any kind of realistic harmonization can be attempted.
BC: How can a company keep up with all of the requirements across the current and future markets it does business in?
CvdV: Frankly a company that doesn’t specialize in tax research and regulatory monitoring cannot do this by itself – there’s really no option but to contract with an external specialized vendor for this information.
BC: What’s the status on global policy initiatives to coordinate the many different real-time VAT control approaches?
CvdV: Within the International Chamber of Commerce (ICC) I co-chair a group that brings together practitioners and decision makers from both businesses and tax administrations. This group is doing the first pioneering work to outline recommended practices for tax administrations that take into account the lessons learned by countries in Latin America, Turkey and others that were the first to experiment with continuous transaction controls. This dialogue also coordinates with regional tax cooperation groups like CIAT and IOTA, which do important work in bringing together tax administrations around these themes.
BC: Any final thoughts and advice for organizations on becoming and staying compliant?
CvdV: It is urgent for multinational companies to stay ahead of the curve and to avoid falling into the trap of integrating local point solutions which ultimately will make it very difficult to take advantage of the promise of new technologies such as the new versions of leading ERP systems that are coming onto the market. These cloud-enabled business back-end systems and the huge progress they represent in terms of processing power need to be fed by global AP and AR systems that incorporate multinational compliance rather than disparate local eInvoicing solutions that create huge costs and strategic risks. The only way to deal with this properly is to perform a broad analysis of all tax-relevant business processes and systems, and then perform a gap analysis based on existing and planned continuous transaction controls mandates. The result from this overlay is a readiness map that should inform a longer-term strategy as to how a company can best withstand the digital tax tsunami.
BC: Thank you for your time and insight, and best of luck on your presentation at the upcoming Exchange Summit in Vienna.
