Electronic Fiscalization (E-Fiscalization) allows tax administrators to record, process, and store transactions digitally ensuring transparency, accuracy and compliance without complex procedures.
Global taxpayers manage business operations and meet tax obligations by documenting their business activities. Documenting business transactions is a threshold issue between the informal economy (undocumented) and the formal economy (documented).
Fiscalization is the vehicle that facilitates the documentation and online availability of business transaction data that, in turn, allows a tax administration to analyze those data to improve tax compliance. The general expectation is that fiscalization will lead to an increase in the level of tax compliance and a reduction of the tax gap by improving the transparency, access, richness, and accountability of data related to business activities.
Benefits of Fiscalization in Local Government Treasury Operations
- Tax Collection efficiency
- Improves data collection across local government treasury
- Engages consumers in the tax collection process
- Provides more timely and richer data for analysis
- Assists in identifying and assessing risks and developing corrective actions to address them
- Enables errors to be detected and predicted so taxpayers can be notified to make voluntary corrections
- Provides data for use in enforcement action (debt collection, audit, sanctions, or investigation)
- Requires tax administrations to expand data storage, increase analytical capacity, and automate risk management
Real-Time Data and Transparency
Effective data collection underpins the effectiveness of electronic fiscalization. Data collection commences with the creation of documents that taxpayers typically use to manage their business, such as sales invoices or fiscal cash register receipts, that are used for calculating and reporting tax obligations.
Fiscalization and digitalization in treasury operations provide tax administrations with real-time and more granular data on a taxpayer's business transactions and on local treasury collections. Data collection and consolidation of reports from local treasury happens immediately upon transaction or payment of taxes.
The local government treasury can adopt a centralized model or accreditation process of several systems. A centralized system is deemed as a closed system as the tax administration controls the issuance of receipts or electronic receipts — reducing fraudulent collections or embezzlement of collected fees or taxes as data is reported in real-time.
"Fiscalization that is limited to just collecting and storing of digital documentation by the tax administration is unlikely to have a sustainable impact on taxpayer compliance behavior."
