Government Is a Data Partner You Might Not Want, But You Have

Globalization has spurred tremendous opportunities and challenges for businesses and society alike. For consumers, integrated economies led to affordable access to goods and products and a higher standard of living overall. As for enterprises, the world has opened for expanded operations, bringing into play new markets and customers, and has fostered an environment of continued innovation. Today, one-third of the world’s multinational companies are headquartered in the US.

While globalization enabled business profits to increase, non-US governments stepped-up efforts to ensure they were collecting their rightful share of sales under local tax laws, especially in the face of mounting value added tax (VAT) gaps. For example, in 2019, EU member states had a combined €134 billion VAT gap. As a result, jurisdictions across the world have been more aggressive in digitizing their tax collection processes and introducing structural changes to the way they regulate and enforce VAT, specifically the introduction of real-time e-invoicing regulations.

These new continuous transaction controls (CTCs) have placed governments in every multinational’s data stack, put corporate compliance under a spotlight, and worse, threatened business continuity for US-based organizations operating abroad.

Providing Real-Time Data to Multiple Governments at Once

While these mandates have given global governments the transparency they need to apply tax regulation, there is no standard enforcement. Therefore, multinational organizations are often left trying to customize reporting for multiple countries’ mandates to comply with varying requirements. As a result, the consequences US-based companies face with non-compliance can include fines, trading partner audits, loss of licensure and in rare cases, even sanctions under criminal law.

The implementation of CTCs carries the expectation that an individual business’ data system must continuously communicate with multiple governments’ tax systems, presenting a significant data challenge to companies and their IT departments. Traditionally, businesses have been able to report to tax authorities via periodic reports created from rough data. However, companies do not have clear policies and approval workflows to draw the line between formal and semantic changes to data. Therefore, this rough data can be used for periodic reporting but not CTCs.

The IT Piece of the CTC Puzzle

Faced with the increasing adoption of CTCs, American IT departments must take the lead on planning a global strategy for e-invoicing compliance for three reasons:

CTCs are the future of revenue collection, and the future has already arrived in over 40 countries worldwide. From Brazil to Italy and across parts of Asia and Africa, governments have become IT departments’ new data partners, and it’s within businesses’ best interests to meet the requirements of this partnership. By creating a global strategy for data mandates, IT leaders can ensure their company complies with current laws while insuring themselves against future requirements.