By Abdullah Zidan

The General Authority of Zakat and Tax (GAZT) will start enforcing the electronic invoicing regulation from Dec. 4 this year. According to a statement of GAZT, the regulations in this regard have already been published. The authority will soon publish the procedures, application mechanisms and phases of implementation of the electronic invoice issuance mechanism, the first phase. Whereas the second phase “Integration Phase” will start effectively from June, 2022.

The executive regulations and all the necessary instructions are expected to be made public within a short span of time. The electronic invoicing initiative is considered as one of the advanced technologies in the world and will put an end to the use of paper and reduce manipulations being practiced by some VAT taxpayers. The implementation of electronic invoicing is keeping pace with the digital transformation that has become the general feature of all services and transactions in the Kingdom.

But what we care about more from this initiative is its positive impacts on the national economy as well as on consumers. If the effect is obvious on merchants to reduce cost, develop their financial and accounting transactions and reduce paper consumption, then the benefits will be reflected on the consumer in a noticeable and clear way.

All commodities which are subject to VAT will be restricted to be sold through an electronic invoice where it contains an authentic information of the seller, hence, the consumer will make sure he is dealing with a legal entity.

Electronic invoicing involves several positive features with regard to protecting the economy, of which the first is that electronic invoicing will eliminate huge percentage of transactions related to shadow economy, commercial concealment, and money leakage through transfers outside the Kingdom by workers involved in commercial concealment activities.

This will also put an end to practices under which a merchant receives tax from the consumer but does not pay it in the absence of a proven sales process as he issues either manual invoices or invoices through a computer program that can be easily amended.

All these result in an incurring losses to the public treasury and thus affecting the national economy. If we manage to recover such losses, they can be added to the funds that are spent on raising the standard of services, and sustainable development; increasing non-oil revenues that reduce the impact of oil price fluctuations on the national economy, and contributing to enhance financial sustainability.

According to findings of informal studies, the volume of shadow economy exceeds SR300 billion and the subsequent tax losses of these amounts are very large and equal even the budgets of some countries with a limited economy. Since the launch of the Kingdom’s Vision 2030 five years ago, the country has made giant leaps with a three-time jump of non-oil revenues to what it was before. This has been instrumental in helping the Kingdom to withstand many of the repercussions of the coronavirus pandemic.

Economic statistics of any trade that is not under tax control will be considerably inaccurate, as these commodities whose sales are not documented do not enter their consumption in the general statistics, and this affects the estimation of the volume of import and domestic production and is considered as a harmful economic waste.

Electronic invoicing is an important initiative that has great benefits, which cannot be described in one article and its impact will be revealed after implementation. The initiative will contribute immensely to support the program to combat commercial concealment and tax evasion, as well as to protect the economy.