When looking to build resilience, reflecting on what has gone well and what didn’t can provide a roadmap for change.
Last but not least, the reliance on smaller or local vendors has revealed some poor business continuity plans, with companies looking for alternative larger providers during times of crisis. As companies look to build resilience, reflecting on what has gone well and what didn’t, will provide an important steer on where to focus on.
2. How much visibility do I have over my regional and global VAT operations, cash-flow and the available government support measures?
Tax authorities and governments are responding to the challenges faced by businesses and individuals alike, offering stimulus packages, delaying deadlines for payments and filing and, in some cases, relaxing certain tax rules. Understanding the level of relief and stimulus measures is a key driver for recovery. Functions should ask: was there clear visibility over new measures resulting in responsive actions, or unfortunately limited overviews?
Another critical factor in aiding recovery is releasing, redistributing and refocusing cash, as and where it’s needed. The need for cash savings has never been greater for businesses across the board – those with global visibility over cash flow positions are faring better on this front. In the case of more decentralized businesses, it can be more difficult for them to get a full picture of their global VAT position and be able to understand the true picture of their cash-flow situation.
3. To what extent am I implementing technology to standardize and streamline VAT processes?
A decentralized compliance operating model tends to be a series of individual, but often similar, processes running in parallel across the globe. With the rise of digital tax administration and digital service taxes, companies run a further risk of developing multiple point solutions, especially as we start to see an accelerated shift to digital and transactional filings.
In contrast, a global operating model can deliver more standardization in its very nature, for example, with data extraction, transformation and loading. This global way of operating provides efficiency gains not possible in a fractured model.
Those who haven’t yet ventured (enough) into tax technology automation are those scrambling to navigate multiple manual processes and therefore, in general, finding the strain harder to bear during COVID-19. With the focus on tax, especially VAT, only set to increase, now is the time to examine the role of technology and automation as an enabler.
4. How much is being spent, internally and externally, on resources to manage VAT compliance?
Operating in a number of jurisdictions across the world may bring a number of third-party providers, either local or regional. Costs can mount across a mixed vendor landscape, not withstanding out-of-scope costs or other unexpected costs. The development of local technology compliance solutions, as described above, can also add to the spend. Can you easily tally up costs spent on managing VAT compliance worldwide?
A recent survey “Reimagining the tax and finance function” indicated 79% of respondents plan to reduce the cost of their tax and finance function over the next two years, and the first step is to build a full picture of current activities and costs. The second step will be to scrutinize the current operating model to identify efficiency opportunities.
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5. How confident am I with our resource and talent profile to deal with VAT compliance complexity?
VAT is often delegated to local finance teams to manage. This has consequences two-fold: firstly, a lack of in-depth knowledge can lead to increased compliance risk and exposure. Secondly, this may mean less knowledge and access to resources, for example, in terms of potential refunds and reliefs available during COVID-19. The current level of legislative changes in an already complicated indirect tax landscape requires dedicated tax talent.
As technology plays a larger role, resource profiles may veer more toward tax technologically minded professionals, too. The right people in the right roles will be critical to support post-pandemic recovery, which also means finding the right mix. The same EY survey indicated 73% of respondents are more likely than not to co-source over the next two years, suggesting we might soon see a shift to co-sourcing as the new normal.
Evolving operating models and technology may be the answer
No company could have predicted the scale and spread of the pandemic. In times of crisis, the best leaders do not look back to lead but forward to where they want to be. There are steps you can take to ensure your VAT compliance and operations are resilient against any crisis which can interrupt business operations. A robust global VAT compliance operating model, focusing on business continuity, cash flow and global oversight, will be key to continue weathering the COVID-19 crisis. Control and visibility are critical, in both business as usual and in times of crisis. This means control and visibility over regional and global VAT operations, visibility over legislative changes and potential opportunities, and crucially, more control over potential cash leakage.
Technology and innovation leading to increased automation can help. The right combination of collaboration with third-party providers, through in-sourcing, co-sourcing or outsourcing, can help too. It’s clear that the more you can automate your VAT processes, the more resilient your overall VAT strategy will be moving forward. Whilst every business is different, every business will likely need a helping hand.
Summary
As businesses focus on recovery from COVID-19, attention is turning to the performance of tax and finance functions. With legislative pace and complexity as a clear constant, control and visibility of VAT operations globally will be crucial, for businesses to not only bounce back but withstand any future crisis.
