Risk & Economy » Tax » The alternative Rugby World Cup: Tackling tax regulation

When the 2019 Rugby World Cup kicks off in Tokyo on Friday 20th September, all eyes will undoubtedly be on the strong formations and slick passes of the usual suspects: England, South Africa, Australia, and reigning champions New Zealand.

But in a competition being billed to promote the sport in a new region, those with a keen eye will know that nations such as Argentina and Japan could cause a few surprises given their increased investment in the sport.

While the power balance in rugby is well known, how would the nations about to do battle in the land the locals call ‘Nihon’ compete if their performance on the pitch was based on their respective tax regulations? Let’s take a look at some of the countries taking part in the tournament, and examine how they’d fare if they were to take to the pitch in regulatory tax terms.

Japan vs Russia

The opening game of the World Cup sees Japan take on relative newcomers Russia in the Tokyo Stadium.

Expect the host nation to be slow and steady on the pitch. Japan’s Consumption Tax is currently undergoing significant reform, rising from 8 to 10 percent from 1st October. At the same time, a reduced rate of 8 percent is set to be introduced on food and certain newspapers.

The process of change isn’t due for completion until at least 2022, though; so, while Japan’s tax authorities are shaking things up, they’re taking their time about it.

Russia looks much the better team in tax control terms, however. E-invoicing, while not mandatory, has been allowed since 2012, involving third-parties such as Electronic Document Operators, service providers accredited to manage the clearance of e-invoices. And, as of 1st January 2019, foreign B2B suppliers of e-services have been required to register, calculate and pay VAT in Russia, expanding a law that previously only applied to B2C suppliers.

Preparation and forward-thinking would appear to make this game a shoo-in for the visitors.

France vs Argentina

Day two of the tournament sees France take on Argentina.

The French have been disappointing in recent rugby competitions, but is the case in tax terms too?

As Finance Minister under his predecessor, Francois Hollande, President Macron voiced support for the idea of an introduction of obligatory e-invoicing for B2B transactions as a means of tackling VAT fraud. But inconsistencies with the country’s VAT Directive and a perceived increase in the administrative burden on companies meant the proposal was rejected at the time.

Times have changed, however, and France – in common with other EU member states – is now considering new opportunities to come down on VAT fraud by entering the path of mandatory B2B e-invoicing. It’s early days yet, but the government has stated it will begin its consulting process with limited parts of the private sector to discuss how to get small and medium businesses up and running as quickly and smoothly as possible.

So, how about Argentina? When it comes to playing rugby, it has one of the most exciting teams on the field, but could it mirror these skills with regard to tax compliance?

The introduction of mandatory clearance e-invoicing over the past few years faced several delays in its roll out, but as of 2019 is in place for the entire economy, the crowning achievement being Resolution 5/2019, which established a schedule for implementing e-invoicing for small and medium businesses, to be made in stages from May to October 2019. Under the resolution, a new group of SMEs will be required to use not only the established e-invoicing framework, but also the new system for electronic credit notes, Factura de Credito Electronica, based on the economic activity under which they’re registered.

Both countries are making progress, although in competitive terms, Argentina’s agility is likely to see it win out over France’s historical reluctance to move forward.

New Zealand vs South Africa

One of the biggest tickets of the opening weekend must be the clash between two-time world champions South Africa and current title holders New Zealand. When it comes to tax, though, which of these two titans would be top of the table?

South Africa has a slight head-start here. New regulations were introduced on 1st May, which expanded the range of electronic services subject to tax in the country, including those previously excluded such as software, cloud computing, and advertising. Consideration was also given to zero-rating sanitary products, although this was ultimately pulled from the bills that were finally passed.

And New Zealand isn’t far behind. From 1st December, all suppliers – including non-resident merchants, operators of electronic marketplaces, and re-deliverers – will be required to register and return goods and service tax (GST – the equivalent of VAT) for imported goods worth NZ$1,000 or less if they exceed NZ$60,000 in sales over a 12-month period.

This game’s hard to call. On paper, South Africa might just steal a win, but it’d be close.

What about Italy?

Finally, Italy are worth a mention in their own right. Perpetual winners of the wooden spoon in the annual Six Nations championship, they’re not expected to progress much further than the group stages. But as the first over the line in Europe when it comes to introducing mandatory B2B e-invoicing, Italy would enjoy a reversal of fortunes if they were to compete in a world cup of tax regulations. What’s more, as of 31st October, all Italian VAT-registered online marketplaces and resellers will be expected to submit reports on every transaction they facilitate. So, while Italy may be stragglers on the pitch, they really are head of the pack when it comes to tax regulation.

As the examples above show, the taxation landscape is in flux. The field of play may be mixed but, as with the Rugby World Cup, every country is chasing a common goal; governments across the globe are employing the tactics they believe will best close their nation’s tax gaps and reduce fraud. And, as with the Rugby World Cup, every country will play to its own strengths in an effort to tackle these issues, and try to find ways of making digital taxation work to best effect.