Getting Rid of Receipt Obligation: Tax Evasion, Paper Waste, and Digital Solutions
Anticipated Severance of Ties Sparks Joy and Outrage
Germany's proposed abolition of receipt obligation sparks debate among tax authorities and retailers. The German Tax Union opposes this move, fearing it could signal weakness in tax controls, especially in tight financial times.
Since 2020, retail traders with electronic cash register systems have been required to issue receipts for every purchase. However, these physical receipts often ended up as waste, attracting criticism. The German Retail Association claims the receipt obligation costs large retail groups millions in expenses.
Yet, tax evasion at cash registers might amount to a staggering €10 billion annually according to various state estimates. Florian Köbler, chairman of the German Tax Union, views the receipt obligation as a success, considering receipts are now often available in digital format. Even though fraud is still possible, he states that the effort involved has significantly increased.
The retail association, meanwhile, supports the repeal. Stefan Genth, HDE CEO, argues that when customers don't want receipts, creating them unnecessarily doesn’t make sense. Additionally, current tax authorities' control density isn't sufficient to check correct bookings of all sales using receipts.
Electronic Cash Registers Take Center Stage
Traders with open cash registers, i.e., those without technical equipment, have been exempt from the receipt obligation so far. From 2027, electronic cash registers will become mandatory for businesses with an annual turnover exceeding €100,000, as per the coalition agreement. Their sales must then be recorded digitally.
The retail association is skeptical about the benefits, considering further costs. Both open cash registers and cash registers have identical recording obligations that tax authorities must control.
For the German Tax Union, the cash register obligation is long overdue. Köbler highlights that this has been in place in Austria since 2016. He emphasizes that this move is essential for fairness towards customers paying income tax and honest businesses.
Digital Receipts: An Environmental Boost?
Dumping the receipt obligation would undeniably contribute to reducing paper waste, aligning with broader environmental efforts in German policy. Transitioning to digital receipts and invoices can lessen environmental impact and maintain documentary requirements for tax compliance.
Meanwhile, it's vital to implement robust digital alternatives in place of physical receipts to prevent an increase in tax evasion. Mandatory electronic invoicing (e-invoicing) can enhance transparency, facilitate real-time monitoring, and counterbalance the potential risks associated with ditching physical receipts.
Recommendations
- Implement Robust Digital Systems: Ensure a sound transition to digital receipts and e-invoicing accompanied by proper digital IRS systems.
- Strengthen Tax Compliance: Enhance tax audits and compliance measures to deter underreporting in the absence of physical receipts.
- Promote Environmental Benefits: Capitalize on environmental advantages by encouraging businesses to embrace digital documentation as part of their sustainability strategies.
- The proposed abolition of the receipt obligation in Germany, initially sparking concern among tax authorities and retailers, could potentially contribute to reducing paper waste, in line with broader environmental efforts in German policy.
- The German Retail Association, advocating for the repeal of the receipt obligation, argues that it unnecessarily costs large retail groups millions in expenses, especially when customers don't want receipts.
- Florian Köbler, chairman of the German Tax Union, acknowledges the potential for fraud in digital receipts but states that the effort involved has significantly increased since the implementation of the receipt obligation, making tax evasion more difficult.
- For digital receipts to truly enhance transparency and counterbalance potential risks associated with the abolition of physical receipts, the implementation of mandatory electronic invoicing (e-invoicing) could be a valuable solution to facilitate real-time monitoring and combat underreporting in its absence.
