Electronic invoicing (e-invoicing) is transforming how governments manage taxes—especially in Latin America and the Caribbean (LAC), where it’s helping reduce informality, curb evasion, and boost revenue. By enabling real-time transaction monitoring, this digital tool strengthens fiscal systems and helps inform better policymaking. The region’s experience shows how targeted digital reforms, backed by institutional support, can deliver measurable development results and inspire global adoption.
A robust fiscal management function is vital to the state’s ability to collect revenue and deliver public services. When governments fulfill these duties effectively and efficiently, they foster trust among their citizens and bolster economic stability, both of which are essential to investment and long-term economic growth. However, LAC countries suffer from high levels of informality, tax evasion or avoidance and weak tax administration systems, all of which severely undermine revenue collection. Indeed, the region’s average tax revenue in 2023 was 21.3 percent of GDP, lagging considerably behind the OECD average of 33.9 percent.
Against this backdrop, several LAC countries have come to the global forefront as pioneers in the digitalization of tax administrations, with electronic invoicing as a major step forward in this process. As its name suggests, electronic invoicing refers to invoices that record transactions in electronic form. Its origins date back to the 1980s, when it was used for business-to-business transactions in the private sector. The application of electronic invoicing for tax collection purposes has been a breakthrough. By enabling tax authorities’ real-time engagement as transactions are digitally recorded, tax collection is greatly streamlined and automated, tax evasion and fraud are significantly reduced, and the resulting data can be used to strengthen economic analytics and public service provision.
The IDB has played an integral role in these efforts for more than two decades, providing both financial support and technical expertise for the implementation and scaling of electronic invoicing. Support from other international organizations, most prominently the Inter-American Center of Tax Administrations, has also been instrumental in these efforts. Additionally, IDB Policy-Based Loans (PBLs) have helped countries establish the institutional and regulatory frameworks needed to attract and sustain such investments. For example, PBLs supported the implementation of electronic invoicing systems in countries like Costa Rica, Paraguay, and Brazil through various projects, laying the groundwork for improved tax administration and digital transformation.
As discussed in a joint IDB-CIAT publication, impact evaluations across five countries have shown some remarkable outcomes of electronic invoicing, particularly in terms of improving tax collection and reducing informality. In Mexico, VAT collection as a percent of GDP improved by 14 percent annually on average following mandatory electronic invoicing implementation. In Uruguay, mandatory electronic invoicing led to a 3.7 percent increase in VAT and corporate income tax collection, while in Peru, reporting of taxable sales and purchases increased by seven percent and five percent, respectively, in the first year after electronic invoicing became mandatory. In El Salvador, the Ministry of Finance reported that VAT collection increased to 4.2 percent of GDP in 2023 compared to 3.7 percent in 2017. In Brazil, which has now implemented electronic invoicing across all states, it contributed to a 12 percent increase in tax revenue and a 2 percent decrease in informality. The IDB has been supporting Brazil’s electronic invoicing journey through the PROFISCO program.
Beyond LAC, these success stories have been far-reaching. Notably, South Korea and India have implemented electronic invoicing over the past several years, while Italy made it mandatory for all business-to-business and business-to-government transactions in 2019. The European Union is currently planning to standardize its use for intra-regional trade over the next decade. Globally, around 90 countries have implemented or are in the process of implementing electronic invoicing, including 17 in LAC. Its application has also been expanded to other uses, including e-payroll, which streamlines deductions for social security contributions, as well as goods in transit.
This digital transformation process has also spurred greater sophistication of tax authorities. As a recent IDB study discusses, electronic invoicing underpins a model for the modernization of tax administrations, Tax Administration 3.0, which leverages advanced data uses to anticipate economic trends and inform public policies. However, this also needs to be complemented by an institutional transformation that includes organizational and functional changes, as well as stronger data protection policies.
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