Research proposal—not an instruction to invoice without VAT. The cash-flow illustration assumes a covered taxable purchase with full input deduction in the same period. It is not a zero rate or a general benefit for non-registered, exempt or partly deductible buyers. Liquidity means cash available for ongoing payments; a gain for one firm can shift financing to another.

If a legally feasible alternative reduces net financing burdens across the chain, businesses should not have to finance that circulation of tax money merely because software can record it more efficiently. That is the intuitive attraction of a wider domestic reverse charge: let the customer account for VAT rather than paying that VAT to the supplier and subsequently recovering it through the tax system. The intuition deserves serious investigation. It does not justify calling the proposal universally beneficial, legally available or fraud-proof.

My position is to test wider reverse charge as a structural option alongside digital reporting, not to announce it as a finished solution. The relevant questions are which transactions could be covered, whose liquidity would improve, where collection risk would move and what European authorisation would be required.

What actually changes

The Commission explains the basic rule under Article 193 of the VAT Directive: VAT is payable by the taxable supplier unless another person is liable. It also describes mandatory and optional cases in which the customer is liable instead.9 Reverse charge therefore concerns the allocation of tax liability. It is not simply a special label for a zero-rated sale.

For the liquidity argument below, assume a genuine taxable business purchase, a legally applicable reverse charge, full deduction entitlement and recognition of the liability and deduction in the same return period. Those are explicit conditions of the example, not universal characteristics of every buyer. An exempt business, a mixed-use purchase or a restricted deduction can produce a different outcome.

In the ordinary arrangement, the customer may need to pay the supplier an amount that includes VAT and wait before the deduction produces its cash effect. Under the assumed reverse-charge arrangement, that particular VAT amount does not travel from customer to supplier. The customer’s accounting obligations remain. The cash-flow benefit depends on payment terms, return periods and how recovery would otherwise occur.

Consider a hypothetical automotive exporter with domestic inputs and substantial qualifying cross-border sales. Trace both its refund cycle and its suppliers’ payment dates. A supplier could have a VAT payment obligation before the exporter pays its invoice, while the exporter has an input-VAT recovery position. For this example, assume ordinary tax-point rules and no payment-based special regime. Wider reverse charge might remove part of that financing chain, but it would not itself shorten the exporter’s contractual payment terms.

A tax receivable reported at year-end is a stock, not the annual flow of refunds. Its composition, opening balance, new claims, offsets and settlements must be reconciled. It cannot safely be assumed to consist only of VAT or to represent a fixed number of months. No annual refund estimate or allegation about a named carmaker follows from this hypothetical example.

Produce crossing the border and coming back

Another concrete case motivating my proposal is Slovak agricultural produce delivered to a Czech distribution centre and subsequently supplied to Slovak retail stores. Here it is a hypothetical chain, not a verified account of a particular retailer. Assume real movements, qualifying parties and satisfaction of the relevant conditions. The Commission distinguishes exempt intra-EU supplies from taxable intra-EU acquisitions, where the customer accounts for the tax.9 Each leg must be analysed separately; two border crossings do not mean two universally tax-free purchases.

This chain can be legitimate. Centralised logistics, purchasing and warehousing may explain it; its route alone proves neither fraud nor a tax motive. The reform question is whether a comparable direct domestic chain faces avoidable differences in VAT cash timing. It is not whether Slovakia should treat cross-border distribution as suspicious, nor whether transport volumes demonstrate artificial exports.

Follow liquidity across the whole chain

The supplier’s position must also be modelled. A supplier that previously received VAT with its customer’s payment may lose temporary cash before its own remittance deadline. If some of its purchases remain taxed conventionally while its sales move to reverse charge, its refund position could change. A gain for the buyer is not automatically the same gain for the entire supply chain.

The public budget has timing effects too. A change in the point of collection can alter monthly receipts without changing the final legal burden on consumption. A transition can also overlap old and new invoices, payments and adjustments. This is why a claim of released business liquidity must not be added mechanically to a claim of extra permanent government revenue.

Define the covered transactions before quantifying any benefit. For the exporter, construct a dated timeline: input supply and tax point; supplier remittance; customer payment; refund claim and settlement. Compare it with the proposed regime, including suppliers’ own input VAT and refund financing. No amounts or fixed ordering of payment and refund are assumed here. A useful evaluation would therefore trace supplier, customer and treasury cash flows separately. It would report recurring financing effects apart from temporary transition effects, and financing-cost reductions apart from the underlying cash amounts. It would also identify firms whose positions worsen. Otherwise, an aggregate success story could conceal a costly redistribution within the business sector.

The Council describes missing-trader fraud as involving a business that charges VAT but does not pay it to the budget, while subsequent buyers redeem VAT as the goods or services pass through the chain.1 A reverse charge prevents the covered supplier from receiving that tax payment from its customer. It therefore targets a specific opportunity within that mechanism.

That is a genuine structural argument. It is stronger than claiming that an electronic invoice is difficult to forge, because the argument does not depend solely on document authenticity. Even a real transaction with a correctly delivered invoice can leave the budget exposed if the collector disappears. Changing who handles the tax money changes that exposure.

But the conclusion must stop at the covered mechanism. Criminal activity could move to transactions outside the regime, fraudulent customer status, concealed final sales or other ways of extracting money. A wider scheme would need careful treatment of private use and customers without full deduction rights. A valid business identifier is not proof that every purchase serves a taxable business activity.

A broader scheme creates a sharper boundary

A policy applying to eligible business-to-business transactions would need a reliable boundary between those transactions and other supplies. Sellers would need clear rules for checking status, retaining evidence and correcting an honest mistake. Buyers would need to understand when self-accounting applies. Mixed invoices, deposits, returns and credit notes would need consistent treatment.

Imagine the manufacturer also sells equipment to a small organisation with limited deduction rights. The software cannot infer the correct tax consequence merely from the existence of a company name. The legal category of the recipient, the supply and its use matter. Automating an unclear rule would distribute the uncertainty faster rather than remove it.

Electronic invoicing can help carry the relevant classifications and correction references. The shadow test should map changes to data models, connectors and user decisions, with versioned rules, reference cases, an accountable source of interpretation and costed implementation checks. Providers cannot infer a transaction’s legal treatment from an identifier alone. It should not turn a temporary verification failure into an automatic accusation against the seller. I would want documented fallback procedures, an auditable correction path and a distinction between reasonable reliance on official information and deliberate disregard of obvious inconsistencies.

European law is not a footnote

The Commission lists defined optional reverse-charge categories, including specified construction-related supplies, and explains special authorisations under Article 395 separately.910 These are concrete legal routes with conditions, not a general power for a Member State to rewrite the VAT collection system unilaterally.

Historical material requires particular care. The Council’s account of its October 2018 agreement describes a generalised mechanism above a transaction threshold, under strict conditions and only until June 2022.1 It demonstrates that broad reverse charge has been considered at European level. It does not establish a current, open-ended permission for Slovakia, and the page also contains earlier proposal details that must not be mistaken for the agreed design.

A Slovak proposal consequently needs a current legal memorandum identifying its exact scope and the provisions that would support it. Where the scope exceeds existing options, the government should explain whether it seeks a specific authorisation or a change to the European framework. Approval cannot be assumed. Nor should general principles of neutrality or fighting fraud be presented as substitutes for the required legal process.

The strongest objection deserves an operational answer

The strongest objection is not that the present system is perfect. It is that moving collection further down a chain may concentrate exposure while making eligibility checks more demanding. Honest businesses might incur new classification costs, and the state might still need extensive reporting. The promised simplification could disappear once exceptions and safeguards are added.

The response must be evidence, not confidence. Compare a precisely specified wider reverse charge with a credible baseline that includes improvements to current administration. Measure losses within the covered sector and possible displacement outside it. Measure refund delays, correction work, disputes and the experience of smaller suppliers, not just large exporters that may have an obvious interest in the change.

A decision sequence rather than a leap

First, map the transactions and affected firms. Second, obtain a legal assessment before changing anyone’s liability. Third, run a shadow calculation using authorised historical data: calculate what would have happened without altering actual returns or payments. Such an exercise tests design and accounting logic; it is not proof of how fraudsters or prices would respond.

Only after those stages should a legally authorised live test be considered. Publish evaluation criteria, lawful data access and stopping rules beforehand. Compare net financing, displaced risks and administrative work across the whole chain, including smaller suppliers. A broader rollout should depend on that evidence, not the political difficulty of reversing an announcement.

Wider reverse charge is worth investigating because it asks an architectural question about money and liability. Its strongest advocates should insist on the hardest tests. A reform that genuinely frees working capital and reduces a defined fraud opportunity will survive precise language; a reform that needs promises of zero fraud and automatic approval is not ready for legislation.

Sources

[1] VAT reverse charge mechanism: preventing VAT fraud - Consilium

[9] Persons liable for VAT

[10] VAT Derogations - Taxation and Customs Union - European Commission