what does our tax culture portend for the future?

what does our tax culture portend for the future?



The arrival of mandatory electronic invoicing for companies from 2024 and more generally of an increase in continuous transactional controls (CTC) is imminent. It is legitimate to wonder about the cultural roots that allow our companies to accommodate these changes, about the different outlook of our Anglo-Saxon neighbors who question their relationship to Leviathan, and about the opportunities that can reconcile these two approaches to more harmonization.

State interference in the private sector is perceived differently in different cultures and legal and economic traditions. The Anglo-Saxon countries, stemming from the tradition of Common Law, with greater confidence in case law, and whose liberal economic culture encourages entrepreneurial independence, takes a dim view of this digitization of tax administration. Conversely, civil law countries such as those of continental Europe, more accustomed to relying on established standards and not being surprised by a request for complete visibility from the authorities, accept this development that they generally consider it positive. But where is the root of these differences and above all what approach would everyone agree on?

What resistance in Common Law countries?

Those who have already broached the subject of continuous transactional controls with Anglo-Saxons could testify to their surprise and concern at the idea of ​​such state interference in the economic life of the private sector.

While in continental Europe, companies have integrated that the tax administration will have access to their documents, the subject of tax digitization remains delicate in the United Kingdom. Also, since its divorce from the United Kingdom and the end of London’s legal influence over Brussels, the European Union has accelerated this transition by granting electronic invoicing mandates to its member countries and initiating discussions around CTCs.

In terms of efficiency, companies in the countries of Common Law tend to emphasize the importance of the end-to-end process, and not that of the document submitted, while in Civil Law countries, the notarial tradition pushes to protect the document above all. This is also confirmed by the probable forthcoming adoption of the new eIDAS 2 regulation, which would broaden the scope of explicit and monitored trust services, including the concept of “digital archiving with probative value” of commercial documents (in particular ), for enhanced legal and physical security for businesses and citizens. In other words, a French company will judge that protecting these documents by sending them to the tax authorities can only provide more guarantees of tax compliance, whereas a British company will be culturally programmed to believe that even if the data provided is correct , it is not the role of the taxman to follow every transaction or commercial communication and the process can go wrong.

It can be observed that in the countries of Common Law, the idea of ​​electronic invoicing is accepted as much as that of the CTC is repugnant. The UK has long encouraged the free automation of business-to-business exchanges. In parallel with this political commitment to stimulate the emergence of digitized supply chains, our neighbors have not set up CTCs but, for about five years, the British tax administration has been using digital technology for the collection of VAT.

Automation, developing a more opportunistic and entrepreneurial approach

What can be criticized in the approach of Civil Law countries is not so much to sin by “blind trust” in the State, as not to have been able to perceive in this automation of controls something other than a tax digitization process, where there is an opportunity to rely on the automation of B2B processes to optimize their business processes and therefore their profits.

A shining example of an insufficient approach is constituted by Latin America, a pioneer of electronic invoicing, where tax procedures are automated but supply chain businesses are being left behind. However, without an explicit policy to make companies benefit from public investment in the standardization of commercial documents and the automation of exchanges between companies and the tax administration, devoid of stimuli, the company will not perceive the economic advantages.

In the countries of Common Law, the phenomenon is completely the opposite: it begins with economic benefits, then it integrates the fiscal sphere. This is perhaps what will allow us to say in twenty years that our cultural differences are surmountable.

The search for interest

The UK, now disengaged from Brussels, could apply this more opportunistic approach to its entrepreneurial ecosystem and then to its tax administration and reap more immediate benefits than EU countries do. If the British tax administration wanted to take advantage of its new freedom vis-à-vis the EU and monetize the digital transition of its tax administration, a modus operandi ready to use exists; it is entirely experience-based and would be extremely beneficial for both business and the tax authorities.

The EU, for its part, has launched a vast program entitled VAT in the Digital Age, and launched a market consultation, soliciting input from many stakeholders. Opinions are unanimous on the need for more organization. This will give the Commission the necessary elements to formulate a fairly strong opinion on how the VAT Directive should be used to steer the CTCs.

Of the two approaches, one with a liberal base and favorable to limited state interference in the private sector, and the other accustomed to state omnipresence, neither has so far fully exploited the opportunities automation offers businesses. However, the search for economic interest, by the adoption of CTCs as a consequence of the wider adoption of the automation of B2B business processes in companies, with its promises of economic benefits, could overcome centuries of tradition because as Adam Smith writes in Research into the nature and causes of the wealth of nationspublished in 1776: “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but rather from the care they take in pursuit of their own interest”.

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