Lessons from Saudi Arabia ZATCA Electronic Invoicing Rollout for United States Tax Compliance Modernization

Abstract

This article explores the phased electronic invoicing regime developed by the Zakat, Tax and Customs Authority and considers what elements of this regime can be adopted by the federal government for tax compliance modernization in the United States without the adoption of a national value added tax. Saudi Arabia was implementing the requirement for taxpayers to generate and store tax invoices electronically from December 2021 and to integrate them with Fatoora from 2023 and 2024, respectively, sending taxpayers by waves of revenue, arriving near the voluntary registration threshold in the years of 2026 and 2027, with simplified consumer invoices being cleared and sent within a day. The United States already has a high rate of payments and filings made electronically, around 85 percent, and a significant number of returns may be underreported, even when they are filed on time, but core master files and a moribund modernization-priority portfolio constrain the scope of new data feeds that can be safely processed. Based on the deterrence theory, the use of third party information evidence, the official records of both administrations, the article concludes that sequencing, published data standards, advance notice and separation of file validation from tax assessment leap across fiscal systems while a national clearance veto on ordinary commercial invoices does not. This comparison is provided as a design exercise in information reporting and transactional pilots, as opposed to a suggestion to enforce Saudi legal form.

Keywords: Saudi Arabia, ZATCA, Electronic Invoicing, United States, Tax Compliance, Modernization