Last week your report concerning the VAT Rules on Invoicing has been voted on in the Economic and Monetary Affairs Committee. What are the main proposals in your report and how will they be of benefit to the business sector?

This is the second report I have been tasked with that deals with issues of economic importance. The other report dealt with the reverse charge mechanism and has the purpose of reducing carousel fraud which is costing member states billions of Euros. This time the report concerned an equally important issue - that of the VAT rules on invoicing. It concerns the changes being proposed in relation to the VAT rules on invoicing which aim to simplify and harmonize these rules, which will affect practically the whole spectrum of businesses. This report essentially called for some fundamental changes that I felt should be made to the Commission’s proposal. The report was received with great approval, with 42 votes in favour and just two votes against.

I supported the goals it wants to reach, also proposing alterations. This proposal is a main pillar in the Commission’s Action Programme, which is looking to reduce burdens on business by 25% by 2012. Let us go over the proposal briefly. The aim of the proposal is to augment the use of electronic invoicing, reduce burdens on business, support small and medium sized enterprises (SMEs) and help Member States to tackle fraud. The proposal essentially is aimed at simplifying, modernising and harmonising the VAT invoicing rules.

One of the main points in my report is hinged about making it obligatory for Member States to offer SMEs the option of using a cash accounting scheme. Cash accounting is practically a mechanism that enables a business to account for and pay VAT on the basis of cash received and paid rather than on the basis of invoices issued and received. I proposed that this should be made obligatory as most businesses find it easier to think in terms of cash flows in and out of their business than invoiced amounts. This would also bring about automatic bad debt relief because, if no payment is received, no output tax is due; as well as the fact that output tax is not due until the business receives payment of its sales invoices. Such a scheme would not be ideal for all SMEs - nevertheless giving these organizations the flexibility to choose which system is best suited to their needs could be extremely beneficial.

With this proposal in mind, the Commission expects to increase the use of e-invoicing by eliminating legal barriers to the transmission and storage of e-invoices. The Commission believes that it is necessary to increase the up-take of electronic invoicing. Furthermore, the electronic storage of invoices will be permitted, even if the original invoice is in paper format, and common storage periods are set. In this respect, my report makes it clear that E invoicing should be placed on an equal footing with paper invoices. The proposed deletion of Article 233 of the VAT Directive that requires e-invoices to contain an electronic signature or Electronic Data Interchange (EDI) will further facilitate the use of E invoices.

Another issue was one that revolved around the harmonization of the period for which an invoice should be stored. The period stipulated in the report is that of 5 years. The Commission’s proposal states that an invoice should be stored for 6 years. This one year reduction will also reduce administrative burdens on business.

The report protects the position taken in the original commission proposal allowing for paper invoices to be converted into electronic format for storage purposes. This reduces the physical space required to store invoices and thus reduces burdens on business. For those that don’t actually own a business it is no big deal, but for those who do, it is a big sigh of relief knowing that they can replace massive physical files with the electronic files on a computer.

According to László Kovács, former Commissioner for Taxation and Customs, this VAT Directive initiative will put forward much simpler, more modern and comprehensive rules for invoicing. He also added that this will place us on a track which will allow businesses to move to a 100% e-invoicing system, saving up to 18 billion Euros across the EU. Following the Commissioner’s views and the vote on my report, we are now looking forward to the final step, which is the voting on this report in the April Strasbourg plenary session. I am convinced that my colleagues will understand the true benefits proposed, and will take this report forward to the benefit of Europe’s business community.

David Casa is a Nationalist MEP

[email protected]

www.davidcasa.eu