E-Invoicing Shuts Tax Evasion Doors
A key obstacle government and responsible authorities face when preparing an accurate analysis of the national economic financial budgeting is the lack of precise data and clear figures to rely on in regards to Value Added Tax (VAT). As there is a noticeable gap between what is supposed to be in the country’s treasury and what’s actually in it.
In fact, a key part of the issue can be attributed to tax evasion, human error, or delayed collection processes. This is where e-invoicing comes in handy due to its fundamental role in providing a capability of turning off the red light on this matter.
It offers reliable solutions that ensure real-time invoice data, automatic reconciliation, and complete, organized tracking. And the result is? lower tax evasion rates and increased revenue; thanks to the accurate monitoring provided by authorized e-invoicing systems.
A Global Look At Tax Evasion Gap: Numbers That Matter
At the European Union level, the VAT gap was €89.3 billion in 2022 (around 7% of theoretical liabilities), compared to €121 billion in 2018. This is a noticeable improvement, despite the economic challenges that the Covid 19 – pandemic – has contributed to causing in countries at both the local and global levels. [Source]
The key takeaway here is that digitization of invoice regulation increases transparency and brings the gap smaller leading to increased trust.
Other Models Around The Globe
1) Italy: From Paper Invoices To E-Invoicing
- Measure: Italy has implemented mandatory e-invoicing (FatturaPA) via the SDI platform since 2019 where the invoice would be sent electronically, then verified and registered with the tax authorities before being sent to the other party. [Source]
- Result: The tax compliance gap decreased from 21.6% in 2018 to 10.6% in 2022, which means more than half in just four years. [Source]
- Reason for Success: The Italian Revenue Agency confirmed to Parliament that e-invoicing through the SDI platform played a fundamental role in reducing the gap, curbing tax evasion, and combating fraud. [Source]
2) Hungary: Real-Time Invoice Reporting
- Action: Hungary adopted a system to send every invoice in real-time to the local tax authorities.
- Result: The gap percentage dropped from 10.2% in 2018 to 2.3% in 2022 (one of the lowest percentages in Europe). [Source]
3) Portugal: E-invoices via the e-Fatura Platform
- Action: Portugal implemented comprehensive digitization with the e-Fatura platform and direct linking with authorities.
- Result: The gap dropped to 1.3% in 2022, after being at 9.5% just a few years earlier. [Source]
4) Mexico: CFDI and Big Data Analytics
- Action: Mexico mandated the e-invoice (CFDI), linking it to the SAT tax authority platform, with official studies to measure the impact.
- Result: The authority announced a historic decline in income tax and VAT evasion, thanks to the reforms and e-invoicing. [Source]
E-Invoicing in The Middle East
Saudi Arabia: (ZATCA) – FATOORAH Platform
Saudi Arabia implemented e-invoicing in two phases: Phase One (Generation) and Phase Two
(The Integration Phase). Phase 2 was categorized by compliance waves based on the annual taxable revenue. All included waves are required to integrate with the FATOORA e-invoicing platform; managed under ZATCA’s supervision.
2) Jordan: (JoFotara)
Jordan implemented e-invoicing through the National E-Invoicing System. As of 2024, more than 90% of sales and revenues were documented, with a value exceeding 68 billion JOD and over a million invoices issued daily. [Source 1] [Source 2]
Egypt: (ETA)
Egypt has implemented an e-invoice and e-receipt system with official programming interfaces (APIs), along with statements about accelerating audits and reducing random estimations. [Source 1] [Source 2]
How Does E-Invoicing Reduce Tax Evasion?
1. Eliminating Fake and Duplicate Invoices
Automated verification of e-invoice data prevents the issuance of invoices to non-existent companies or the duplication of the same transaction.
2. Mandatory Digital Documentation
The digital signing of invoices and embedding a QR code to them prevents data from being modified or deleted after issuance.
3. Tracking Transactions Across the Supply Chain
Connecting invoices from suppliers and distributors reveals any attempt to conceal sales or alter their value.
4. Early Detection of Suspicious Activities
AI algorithms detect unusual patterns, such as sudden price changes or the issuance of invoices at unusual times.
InvoiceQ’s Role in E-Invoicing
At InvoiceQ, we don’t just provide an e-invoicing system; we give our clients a strategic tool that enables them to grow with confidence by offering:
- A Smooth and Smart Invoicing Experience
Seamless integration with global ERP and POS systems that simplifies any business workflow without technical complications. - Direct Integration with Local Tax Authorities
We ensure immediate compliance and help businesses avoid penalties or risks by staying in line with the announced local tax regulations of each country that we serve. - Accurate Analytics and Proactive Solutions
Advanced dashboards and tools that enable you to detect gaps before they become problems; enhancing transparency and better business decisions. We also guarantee that your invoices are delivered with the correct format.
