Is E-Invoicing The Solution To All Evils?

Italy will be the second European country to introduce a mandatory eletronic invoicing system in the midst of doubt

On January 1st 2019, the system of electronic invoicing became mandatory for private businesses. Italy is the second European country to introduce this informatic system after Portugal, where it is mandatory since 2012. The measure follows the European Union VAT directive aimed at modernizing public administration and fighting tax fraud. While the e-invoicing had already become law in Europe for businesses to government (B2G) in 2015, it is still optional for businesses to taxable subjects (B2B) and private consumers (B2C). In 2017 thus, the former Gentiloni government had to request a permit to the European Commission to make it mandatory.

How does it work?

The eletronic invoice has to be completed in a specific digitally signed xml format (eXstensive Markup Language) and then it must be sent to the so-called “Sistema di Interscambio” (SDI). The Italian Revenue Agency currently uses this platform for the electronic invoices directed to public bodies and is responible for checking whether the invoices are filled in the correct way. If something is wrong, the platform will send the invoice back to be redone. In this way, the Italian Revenue Agency should finally manage to get a full picture of the Italian economy, finding the non-declared IVA (the Italian VAT) and reporting it to the competent authorities.

Will it be efficient?

In recent months there have been many debates about this measure and predictions about its efficiency seem way more negative than positive. If in Portugal it is universally recognized that this instrument worked for tackling down corruption, it is important to point out that Italy has a more complex economy and red tape. One of the main criticisms to the e-invoicing system is that it will economically affect more small and medium enterprises rather than big companies. Many entrepreneurs are indeed not used to new technologies and they will probably entrust the e-invoicing management to their accountants. This means that an adjunctive cost — on top to the many that they already have to face — will be unavoidable. According to some experts, the provision should have been introduced more gradually, starting with business of a certain dimension.

Rome, we have a problem

However, the American RAND Corporation published a new study on corruption in the EU states, in collaboration with the European Green Party. Italy ranks very badly, as the country shows the highest level of corruption in absolute terms. Every year Italy loses 236,8 billions of euro, more or less 13 precent of GDP, namely one and a half times the budget for the healthcare system. Corruption is a really serious problem, but it is not always visible and it is not widely perceived among public opinion. We will see in 2019 if this measure can provide a definitve solution or if it will simply turn into further, detested bureaucracy.