25 Nov The EU and the draft directive on e-invoicing – grumpy pedantry this is not
A couple of articles ago I mentioned the EU’s draft Directive on eInvoicing. It is a sensible document. However it has some problems which raise important questions.
The core problem is that the reasoning in the Explanatory Memorandum to the draft is flawed. This is not just grumpy pedantry but something fundamental.
The reasoning runs: four member states have requirements for eInvoicing; each has a national standard and the standards are not interoperable; therefore (1) this adds complexity and cost for cross border trade (2) this creates market barriers and (3) “overall the result is that adoption of eInvoicing in Europe is very limited”. I think conclusions (1) and (2) are overstated but the main concern is that (3)is a non-sequitur and is not an adequate analysis of the ‘problem’.
The Memorandum states that the solution to this ‘problem’ should be an eInvoicing initiative in public procurement which would “prevent the fracturing of the internal market and facilitate the uptake of eInvoicing”. An obligation should be imposed on contracting authorities to accept eInvoices that comply with a standard ‘semantic data model’ that the EU will put in place. This will be ‘a stimulus’ to ensure interoperability of eInvoicing in public procurement.
The draft argues that “there is little indication that without EU action the current situation concerning eInvoicing in public procurement will change or improve in the foreseeable future”.
What I like about the proposals is that they are not technically prescriptive. Member states and contracting authorities will remain free to do whatever they want so long as they do not refuse an eInvoice presented in the standard form. This is a pragmatic response to complexity.
The problem is that non-sequitur. It is not established that lack of a technical standard is the reason for the slow adoption of eInvoicing in public authorities. Therefore creating the standard may not address the underlying issues because the ‘solution’ and the ‘problem’ are not aligned.
In a similar way, Recital (3) of the draft states that the multiplicity of non-interoperable standards [presumably technical data standards] “results in excessive complexity, legal uncertainty and additional operating costs for economic operators…”. I think this is also flawed in respect of that “legal” uncertainty. Essentially I make the same point: there are probably deeper reasons for “legal” uncertainty than incompatible standards in semantic data models, for example national legal requirements for the information to be shown on invoices. This includes long-standing trade custom and practice in various jurisdictions. If this is correct then harmonisation of the relevant law and practice is at least as important as a technical standard. It is foreseeable that if the fields which the data standard sets as a minimum for an eInvoice do not match national law and practice, then local requirements will usually prevail. This works both ways – invoices which have too little information for some local requirements and those which contain more data than host systems are able to accept. In the latter case I suspect that the Commission’s assessment that there will be no financial impact of the Directive is dubious.
In a final twist, the Directive applies where the invoice is “issued and received in any electronic format”. “Any electronic format” is very vague but it does mean that if the invoice is issued on paper but is then scanned then the Directive does not apply.
Ian Burdon can be found on twitter @IanBurdon