KUALA LUMPUR: E-invoicing will improve tax compliance and is a definitive approach for the government to tackle the huge leakage in taxes arising out of the shadow economy, said Soh Lian Seng, KPMG head of tax in Malaysia.
The introduction of the e-invoices system was an indication of the government and tax authorities' efforts towards digitisation, headded.
"The system will allow for the live monitoring of transactions in companies and render it difficult to under-invoice.
"Observations out of Italy, which first mandated e-invoicing in 2014, found that its e-invoicing system detected undue VAT credits amounting to 1.1 billion euros while VAT payments increased by 3.6 per cent between 2018 and 2019," Soh added.
He said e-invoicing minimised human errors and saved costs as time and effort spent by businesses was reduced in order to gather data for their year-end financial reporting.
Furthermore, it increases data transparency which gives tax authorities confidence as the e-invoices are issued in a standardised format.
"For businesses, proper internal controls are crucial in order for tax risks to be kept to a minimum, which can only be determined through performing a thorough risk review of the company's processes and supply chain system.
"This encompasses cybersecurity considerations and the necessary training of personnel to be tech savvy," he said.
Soh suggested a phased implementation, beginning with the business-to-government (B2G) segment and the top 300 companies before expanding to other segments to give small and medium businesses (SMEs) time to prepare and upgrade their systems for the transition.
"It will allow SMEs to reduce their business costs of investing in new technology and processes, while also ensuring that SMEs' digitisation of applications is standardised," he said.
Source: https://www.nst.com.my/business/2023/04/895835/e-invoicing-improve-tax-compliance-make-it-tough-under-invoice-kpmg