Where does your company sit on the VAT/GST management continuum?
Should you be paying more attention to how you manage indirect tax?
Summary: Every organization has different needs and different challenges. But there are common themes applicable across all businesses.
Objective answers to the following questions may help you identify whether you should be paying more attention to how you manage indirect tax.
- Are you charging and recovering the right amount of tax in every country — not too little or too much?
- Are you registered for VAT in all the countries where you should be?
- Do your cross-border transactions avoid double taxation and unnecessary foreign registrations?
- Do your systems charge tax correctly for every operation?
- Is the format and detail of your invoices correct for every jurisdiction?
- Are you collecting all the necessary data in "real time"?
- Are you filing your returns and making payments on time every time — and everywhere? Are you confident about control of your processes?
- Do you have the right resources to report accurately, deal with change and identify and address risk?
- Where should you outsource?
- What should you do in-house?
- Should you centralize compliance and control or is an in-country model better?
- Could you do more to minimize VAT audits and penalties?
Possible triggers for changing how you manage VAT/GST
There are several reasons why you would want to change how you manage VAT/GST. Triggers may include:
- Finance function transformation
- Merger or acquisition, spinoff
- Major business restructuring
- Change in tax director or CFO
- Key personnel turnover
- ERP implementation or upgrade
- Shared services center migration
- Internal audit compliance review
- SOX control failure
- Audit surprises, underpayments or overpayments
- Tax software implementation
- Global outsourcing project
The VAT/GST risk management continuum
Every organization has different needs and different challenges. We see a wide range of approaches to indirect tax management which form a continuum.
Where does your company sit on the
VAT/GST management continuum?
We are seeing a core indirect tax management and control framework emerge in those businesses with a mature indirect tax management structure.
This core indirect tax management and control framework recognizes that there are three aspects of indirect taxes to manage:
- Strategic (planning and controversy)
- Operational (accounting)
- Compliance
It involves setting clear objectives to determine the strategies to achieve those objectives, and a clear allocation of responsibilities.
Building the core framework
How you build out the core framework will vary and will depend on a number of factors, including corporate structure, and the attitude taken by management to indirect taxes, to the risk management of taxes and to recognizing the shared responsibility for managing indirect taxes across the end-to-end process.
Successful implementation of this model is also dependent on access to resources, technology and the data supply chain, (i.e., visibility of indirect taxes). Measuring the amount of VAT under management is a crucial tool in identifying the quantity of risk and where indirect tax resource is needed.
Increasingly, global companies with effective global compliance and reporting processes are integrating indirect taxes into those processes and using them to move them along the continuum towards leading class practices.
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