Advice & Best Practice

The Global Evolution of Indirect Tax

Indirect tax departments are operating in an unpredictable climate. Highly skilled at keeping up with tasks such as changes in rates and rules, staying on top of compliance, and sending punctual responses to audit requests, indirect tax teams now need to shift from survival mode into a new, proactive and strategic way of doing business.

Organisations face increased complexity with increased regulatory changes being observed around the world. Examples include Spain’s Suministro Inmediato de Información (SII), the Standard Audit File for Tax (SAF-T), India’s Goods and Services Tax (GST), the Gulf Cooperation Council VAT and, of course, the HMRC’s Making Tax Digital (MTD).

Surviving these constant indirect tax demands across multiple territories requires focus and a skillset that enables teams to keep on top of changes in rates and rules, and compliance, while sending punctual responses to audit requests to avoid estimated audits.

These shifting sands are proving quite a challenge. Internally, tax experts can be constantly working on repetitive and time-consuming compliance and audit work with little time for strategic and value-added activities. While other departments within the business, such as finance and marketing, are investing in technology to keep up and stay current, how much is being invested in new tech to support the ever-increasing demands on the tax department?

As governments around the globe maximise technological advances for efficient collection and verification of transaction information, companies’ standard operating procedures will continue to be disrupted. These tax authorities are investing heavily in utilising technology and building teams in new ways, and even hiring data scientists to work with information from taxpayers. Businesses could be fooled into thinking that they can survive in the short- term by taking a ‘sticking plaster’ approach to remaining compliant and meeting the ever- changing legislation, but this is a false economy.

Legacy processes and procedures adopted by indirect tax teams over the years will be insufficient for meeting the pressures that are ever-increasing from all jurisdictions. Companies need to encourage their tax departments to embrace the digital transformation of tax processes and look at these changes as an opportunity for both the team and the business itself.

It is possible to move from survival mode to thriving in a world of ever-changing and expanding regulation. The autopilot path may feel comfortable and safe for many, but the impacts of insufficient processes and technology could leave companies exposed in the long run. A strategic indirect tax team will be able transform processes by creating a consistent approach to compliance, removing the risk associated with varied methods across business units and locations. They will have the ability to adopt accurate and dependable tax positions at the time of purchase/sale that will ease the audit process.

By adopting the right technology and software to support the business, companies will also have the foresight and flexibility to restructure their indirect tax teams. Being able to forecast and adapt to new legislation with ease will enable the organisation to future proof itself and reduce its reliance on consultants and IT. Furthermore, the ability to support the business, during the creation of new operations, M and A activity, or sizeable capital purchases, and so on, means the company can ensure it meets the right tax considerations in a timely manner.

The digitalisation of tax is an opportunity for indirect tax teams to adopt a proactive spirit and partner with the broader finance department. Together they can review what technologies other tax teams and larger finance teams are deploying as well as identify where technology is lacking. Working together will ensure the business benefits from smarter investments in technology that allows its experienced tax teams to be strategic rather than bogged down with manual tasks. The ongoing introduction of global tax legislative initiatives show that the deployment of forward-thinking technology is no longer optional but absolutely crucial to succeed.

Utilising technology can be a powerful way to embrace these changes while enabling indirect tax departments the opportunity to think critically, and strategise. It most certainly isn’t about replacing qualified professionals, it’s about getting them back to what they signed up to do without drowning in manual tasks. Plus, getting tax right the first time improves buyer/supplier relationships and also saves the tax team from unnecessary distractions.

By Steve Smith, Proposition Lead, Corporates at Thomson Reuters Tax and Accounting

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