Peppol CTC

Increasing tax revenues through digitalisation

Many governments around the world now recognise digitalisation as an effective mechanism to:

  • increase efficiency in business processes between trading partners;

  • combat the loss of indirect tax revenues due to maladministration, fraud and evasion by businesses;

  • increase efficiency for both tax authorities and businesses in the collection of tax.

Already, governments in Europe, Asia, Australia and New Zealand utilise the Peppol Business Interoperability Specifications (BIS) and the Peppol eDelivery Network to receive millions of electronic invoices from businesses (B2G), as well as enabling businesses to invoice each other (B2B). This already enables considerable benefits for the users. However, the Peppol approach also provides a solid foundation for governments to implement digital controls to simultaneously increase tax revenues and further increase business efficiency.

The indirect tax gap

Lost tax revenue is a significant problem for governments around the world, for example, the most recent report from the European Commission, published in 2017, estimated the EU VAT gap at €137bn.

Continuous Transaction Controls

Governments are developing a variety of solutions to bring the tax gap under control. Continuous Transaction Controls, or CTC, is a generic term that describes digital control mechanisms used by tax authorities to collect transactional invoice data in real, or near-real time, so that tax receipts can be matched to business activity.

Policy considerations for tax authorities

There are six prerequisites that need to be in place before introducing CTC solutions in a tax jurisdiction:

  • compliance strategy and legislative framework;

  • technology infrastructure and governance;

  • change management and performance measurement.

Technical considerations

Several models have been, or are in the process of being, deployed by different tax authorities around the world. Key decisions include:

  • hard/soft clearance model or real-time reporting model;

  • central technology platform or distributed service providers;

  • standards-based/international or proprietary/national approach.

Peppol four-corner model

Providing interoperability based on Peppol BIS (based on ISO/IEC 19845 Universal Business Language (UBL) standards) and the Peppol eDelivery Network for the secure exchange of structured business documents, the Peppol approach provides a  fully scalable, cross-border four-corner model, utilising a market of private  sector service providers connected to sending and receiving organisations.

Key to the model is a central address registry providing dynamic discovery of participants, supported by centralised or distributed capability look up services. 

A solution for tax authorities

To support regulated document exchange between sellers, buyers and tax authorities, OpenPeppol will introduce a five-corner model, facilitating both clearance and reporting CTC models in the Peppol Network.

OpenPeppol is forming an Advisory Group of tax authorities to define the business requirements needed to develop a repeatable, standards- based CTC infrastructure that will enable governments to safeguard tax revenues in an efficient, business-friendly environment.