EBL input to EC consultation on the Final Report of the Expert Group on e-Invoicing

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  • 1. Consultation on the Final Report of the Expert Group on e-Invoicing Comments of the European e-Business Lab and of its constituents Submitted to the European Commission on 26 February, 2010 Submitted on behalf of the European e-Business Lab by: Carmen Ciciriello Mairi Hayworth Chairman Director of Operations European e-Business Lab European e-Business Lab carmen.ciciriello@euebl.org mairi.hayworth@euebl.org E UROPEAN E-BUSINESS L AB | VIA CARLO TROYA, 38 | 70031 A NDRIA (BA) - ITALY | HTTP:// WWW.EUEBL.ORG
  • 2. Consultation on the Final Report of the Expert Group on e-Invoicing Background of the European e-Business Lab The European e-Business Lab (EBL) is a cross-industry initiative launched by successful organisations committed to sharing and improving e-Business best practices, adoption, standardisation and innovation. EBL constituency is composed of corporate enterprises, industry associations and public administrations at regional and local levels. Our mission is to empower enterprises in fostering e-business adoption for the development of an open and interoperable European e-Business ecosystem. The Lab provides its members with insight and practical knowledge, promotes research and user-driven innovation, while encouraging the development and adoption of common methodologies for value chain automation and standardisation. EBL supports its members with the implementation of their e-business development programmes, promoting co-operation and facilitating the participation of SMEs. EBL Living Lab Living Labs are open innovation environments in real-life settings, in which user-driven innovation is fully integrated within the co-creation process of new services, products and societal infrastructures. Living Labs have an important role in filling gaps. They bridge the different gaps between technology ideation and development on the one hand, and market entry and fulfilment on the other. The European e-Business Lab (EBL) is the first Living Lab in Europe focused exclusively on e-Business development. In November 2009, EBL published a free guide for SMEs on e-Invoicing. The Guide combines business, technical, legal and compliance information in a way that interested SMEs can be armed with knowledge when making their own independent decisions to chart the best way forward for their business. In order to reach the largest audience, the English version of the guide has been seeded on major eBusiness portals around the globe and is now being translated into Italian, German and Spanish. EBL is a winner of the call for tender to establish a centre of excellence, in the Region of Puglia (Italy), for the development of best practices in e-Business and European economic integration. The Lab is analysing the e-business opportunities for the local economy, taking a systemic approach. Mapping the regional economy, analysing the strategic industries and defining the key actions to implement that will most benefit its enterprises and citizens. E UROPEAN BUSINESS L AB | VIA CARLO TROYA, 38 | 70031 A NDRIA (BA) - ITALIA | HTTP:// WWW.EUEBL.ORG
  • 3. Consultation on the Final Report of the Expert Group on e-Invoicing General assessment: 1. Do you agree with the report's assessment, conclusions and recommendations? The European e-Business Lab (EBL) agrees in principle with the conclusions of the Expert Group and in particular strongly supports the recommendation to harmonise and clarify the legal and VAT framework based on equal treatment of paper and electronic invoices. EBL believes ‘equal treatment’ is paramount if mass adoption of e-Invoicing is to be achieved, particularly among the SME community. 2. What other suggestions/recommendations would you have? An excerpt taken from the ‘Code of Practice’: ‘There remains a lack of standards in e-invoicing practice. Significant efforts are currently being invested in developing new e-invoicing technologies and market practices. Any regulatory interven- tion to narrow the scope of potential options is likely to harm innovation in this area. It is important that businesses in Europe can choose the e-invoicing technologies, business control framework and processes that best fit their unique circumstances.’ EBL is entirely in agreement with this statement as it pertains to technologies, business controls and proc- esses, but where messaging standards are concerned, we believe that government intervention might benefit the entire community. In the past eBusiness standards have been driven primarily by special interest groups, resulting in an array of global, regional and industry standards. This has caused uncertainty for businesses and reluctance on the part of ERP vendors to invest in ‘built-in’ e-Business capability in their software. ERP software often comes with import/export capability for payments (but not for invoices, orders etc.) simply because bank payment standards are generally defined regionally tending to remain unchanged for long peri- ods of time. With governments now implementing and promoting eBusiness solutions, there is an opportunity for them to be the drivers of a single global eBusiness messaging standard for all transactions. This would promote fur- ther adoption by ERP vendors and create the basis for a truly interoperable framework. Business requirements (Section 3 of the report) 3. Is there an important aspect for the successful uptake of e-Invoicing missing in the list of defined business requirements, especially to facilitate mass adoption by SMEs? EBL believes the key drivers of mass adoption will be simplification and communication with an emphasis on the promotion of standards convergence in eBusiness messaging. The long-held belief that SMEs, in par- ticular, would commit if external providers handled the technical and regulatory complexity, has simply not materialised. While there is certainly a growing market in favour of outsourcing e-business capability, in recent surveys, a large part of the SME market has stated a desire for self-sufficiency. The market needs to provide SMEs with low-cost, simple to use eInvoicing tools, accessible guidance, and a harmonised legal and VAT framework. It is equally important to focus on the transition phase from paper to electronic invoices. In particular, it must be possible and financially viable for an SME to facilitate a ‘mixed presence’ of paper and electronic in- voices. Indeed it is possible that even in the long term certain very small companies/individuals will continue to use only paper invoices. E UROPEAN BUSINESS L AB | VIA CARLO TROYA, 38 | 70031 A NDRIA (BA) - ITALIA | HTTP:// WWW.EUEBL.ORG
  • 4. Consultation on the Final Report of the Expert Group on e-Invoicing Legal and regulatory aspects (Section 4 of the report) 4. Is the Code of Practice proposed by the Expert Group suited to complement future VAT legislation? If not, how could it be improved? Yes. The Code of Practice is based on the core fundamentals of business practice and therefore well suited to complement future VAT legislation. 5. Do you agree with the 11 core principles set out in the Code of Practice in Annex 3 of the report? Is any important element missing? Yes. We agree entirely with the principles but would point out that they are valid only from a B2B perspec- tive. 6. Beyond VAT legislation are there any other significant regulatory barriers which prevent the uptake of e- Invoicing? EBL can not stress enough, the need for equal treatment where eInvoicing and eArchiving are concerned. The intent of invoice fraud is to either gain financially by receiving payment or to falsify sales or tax records. In all instances a payment from the receiver is required to complete the invoice life-cycle. When the appro- priate internal business controls are applied to the eInvoicing process (the matching process and the controls over entering/maintaining supplier bank account details), there can be no payment for fraudulent invoices and therefore no full cycle process in order to complete a criminal transaction. It is equally important to note that the process of ‘electronically’ matching an incoming e-Invoice to its sender/receiver references and its source data is already a significant improvement on the manual human process. There has been a great deal of discussion surrounding the complexity and administration of advanced or qualified digital signatures and there is certainly no doubt that many providers have invested heavily in these technologies, but that should not be a consideration for imposing these technologies (in particular the re- quirement for third parties) where they are not required. EBL believes however that digital signatures do have a place in the electronic payment signing process, in keeping with equal treatment for manual payments and should be applied as appropriate in this area. In addition, e-Archiving rules and requirements often impact e-Invoicing adoption. In certain countries, such as Italy, a number of additional requirements are creating unnecessary complexities and hampering adoption within the business community. It is highly recommended that EU Member States align their national legislation to the first proposal 1 of the European Commission to amend the VAT Directive which fully meets business requirements for harmonisa- tion, equality of treatment and technology neutrality. Interoperability (Section 5 of the report) While EBL agrees that interoperability is central to establishing growth in e-Business and e-Invoicing, we believe the definitions of the different types of interoperability should be aligned with Enterprise Architec- 1 Proposal for a COUNCIL DIRECTIVE 2006/112/EC on the common system of value added tax as regards the rules on invoicing. E UROPEAN BUSINESS L AB | VIA CARLO TROYA, 38 | 70031 A NDRIA (BA) - ITALIA | HTTP:// WWW.EUEBL.ORG
  • 5. Consultation on the Final Report of the Expert Group on e-Invoicing ture concepts. As such semantic and syntactical interoperability are part of the Information Architecture or Information Interoperability, Business Interoperability includes the aspect of the Business Architecture and Technical Interoperability is concerned with the System and Integration Architectures. Some key points: • The term SCHEME has several different meanings in the non-banking business community and as such, the ‘Collaboration Protocol Profile and Agreement (CPP - CPA)’, as extensively described in the past by the ebXML community might describe more accurately what is needed (please see the ebXML specification: http://www.ebxml.org/specs/ebcpp-2.0.pdf). • We question whether establishing a new body for defining and maintaining Actors and Roles is really necessary. Perhaps mandating OASIS, OAGI or UN/CEFACT in combination with ISO to maintain these definitions building upon what is already available (defined by UN/EDIFACT) might be a more cost-effective approach. • We believe that forming a new body for defining addressing and routing within CEN could be more effective by involving a standards organisation such as OASIS that is working on developing the Ex- tensive Party Information Language xPRL, and the working group on STORK, e-ID. • The Four-Corner model is a natural extension of the requirement service providers are faced with to connect their network to other networks enabling greater reach for their clients. However it should be clear that this definition accounts for all types of service providers and does not only present the situation where banks are involved. • We question whether it is customary and accepted practice for either the service provider of the seller or the service provider of the buyer to issue the invoice in the name and on behalf of the sup- plier (as described under “In such a situation”). • The scenario in the report where structured invoice data is accompanied ‘with a signed PDF’ seems misleading. Whether the sender or the receiver creates the PDF invoice for visual purposes only, it is derived from the structured invoice data that has been processed electronically and therefore should not need to be ‘signed’. We believe that companies exchanging structured data that is automatically processed by their systems can easily ensure compliance with VAT rules by trading under an EDI agreement. 7. Is the 'eco-system' described in the report a valid target environment? Does it reflect all requirements for an open and interoperable level playing field? Business trends can be short-lasted or even cyclical (ex: central vs. regional processing or product line vs. territorial alignment, etc.) and therefore models that rely entirely on concepts such as ‘outsourcing’ may be limiting the playing field for the future. An open and balanced environment for all types of eBusiness models is important. There appear however to be some limitations in the report. While a standard for the content of the invoice has been identified, there are no recommendations relating to other important aspects necessary to create an open and interoperable ecosystem, such as: user identifiers, certainty of delivery and receipt, harmonisation of e-Archiving rules. We hope these aspects will be covered in the future activities of the Commission. E UROPEAN BUSINESS L AB | VIA CARLO TROYA, 38 | 70031 A NDRIA (BA) - ITALIA | HTTP:// WWW.EUEBL.ORG
  • 6. Consultation on the Final Report of the Expert Group on e-Invoicing Content standards (Section 6 of the report) 8. Is the proposed target data model (UN/CEFACT CII v.2) meeting user requirements? It is too early to say at this time but the standard seems complete and flexible. This is a significant step in the right direction but the Cross Industry messages may need to be available for all common business transac- tions before many large corporations will be willing to adopt. However, it is necessary to identify the differ- ences with other standards commonly used (in a gap analysis). It would have been preferable to adapt a stan- dard already widely adopted and tested. It is also disappointing however that there will be a set of cross- industry standards (UN/CEFACT – CI) for all of the core business processes and yet the SEPA payment standards are based on ISO. A minority position in our constituency, representing a global IT services company, strongly believes that creating a semantic reference data model as the basis for all other message standards (OASIS, OAGI, EDI- FACT, ANSI X12, ETSI, etc.) is needed and should be encouraged. It is suggested a common body should maintain the development of the semantic reference data model and the linking specifications, preferably CEN should take up that up that role and task. Implementation of the Framework (Section 7 of the report) 9. Do you agree with the proposed implementation bodies and the tasks assigned to them in the report? From the report: ‘National e-Invoicing bodies: Each Member State should create or mobilize a new or an existing body to act as the champion and advocate for e-invoicing in their environment. Such bodies could be created or mobilised as appropriate by government, the private sector or a mixture of the two. The composition of such bodies should be balanced and represent a cross-section of interested stakeholders.’ EBL agrees entirely with the tasks set out for these bodies but believe it would be sufficient to have a na- tional body that caters for the standardisation and harmonisation activities within a country. We are con- cerned about the number of bodies (as mentioned in the Interoperability section above) and about the assur- ance of ‘balanced representation’. This concept was clearly not followed in the formation of the Expert Group. How will the Commission provide this assurance to the wider business community? 10. Do you see other implementation tasks that can not be entirely left to the market alone? Yes. Possibly, standards convergence. Government adoption could be instrumental in promoting market ac- ceptance. Beyond the definition of standards, which should have been agreed among market participants, there shouldn’t be other regulatory activities. However, there should be a body to define the correct imple- mentation of the standard, rules and tools to apply conformity tests, and to provide implementation guide- lines. 11. Do you see other bodies or organisations which could play an important role in implementing the frame- work? Yes. Academic Institutions are very important. Education is a key area that could be improved. For wide- spread adoption to occur, the key concepts, market impact and regulatory framework should form a core part of all basic business studies within the national curriculum. E UROPEAN BUSINESS L AB | VIA CARLO TROYA, 38 | 70031 A NDRIA (BA) - ITALIA | HTTP:// WWW.EUEBL.ORG
  • 7. Consultation on the Final Report of the Expert Group on e-Invoicing Specific aspects for SMEs and eInvoicing 12. Do you believe that SMEs needs are sufficiently covered in the report? Are there any other means to promote the adoption of e-invoicing by SMEs? SMEs are quite sensitive to cost reduction. The success of e-invoicing adoption depends on the level of com- petition among vendors which should be numerous and not limited by national borders. It is important that the Commission in order to favour the development of new e-invoicing providers would opt for standards and scalable rules, without barriers to entry, that would facilitate the switch from one pro- vider to another. SMEs need more guidance on choosing a suitable e-invoicing implementation approach, explaining the impact of interrelationships between drivers and inhibitors on their business. In summary, we believe that standardised solutions based on fully harmonised legislation would enable the development of pan-European low cost solutions and services. Governments however would need to develop specific policies to favour SMEs investments. 13. Are the guidelines for SMEs in Annex 3 comprehensive enough? Would you suggest any additional con- tent? Yes. The cost ‘take out’ model is often misleading for those SMEs considering eInvoicing. When a small number of staff is employed, they are generally multi-functioning; therefore headcount reductions may be unrealistic in the SME case. A low cost growth model is a more realistic selling point, providing competitive advantage. This could be included in the cost/benefit models. E UROPEAN BUSINESS L AB | VIA CARLO TROYA, 38 | 70031 A NDRIA (BA) - ITALIA | HTTP:// WWW.EUEBL.ORG