Indirect tax developments in 2015
The indirect tax world is in constant motion. What was true yesterday or even today may prove to be wrong tomorrow.
Ignoring recent developments in indirect taxes or not being compliant with indirect tax obligations will become an expensive oversight for companies of all sizes, whether they are active in the local market or on a global level. Only those who pinpoint which changes are most relevant to their business and where to take action can prepare effectively.
Four trends that shape the global indirect tax landscape:
1. Indirect taxes continue to grow while direct taxes stagnate: Whether the need is to finance targeted stimulation programs for a local economy, or whether it is to generally make up for the gaps left behind by a shrinking economy, indirect taxes have proven to be the first choice for generating revenue for governments in many countries.
Also, as VAT/GST systems are spreading, VAT/GST rates are rising and excise taxes are increasing on an almost global scale.
2. Indirect taxes are adapting to new economic realities: Indirect taxes are strongly intertwined with the economy given the fact that an object taxed is an economic transaction, such as the sale of a good or the provision of a service. If the nature of these transactions or the way that such transactions are handled change, this immediately has a strong impact on indirect taxation.
E-commerce and virtual currencies are on the radar of an increasing number of governments, and they are adapting their tax systems to capture these transactions.
3. The global trade landscape is changing fast: While governments are counting on exports for growth, they are at the same time restricting imports. On the positive side, it should be mentioned that countries are negotiating measures to facilitate trade.
In constant search for revenue, jurisdictions have started to increasingly focus on the customs tax base. There are attempts to increase the base, like eliminating the first-sale concept and tightening the definition of dutiable royalties. This is reflecting a global trend. The result could be that royalties and service fees will have to be added to the value of imported goods to properly reflect their value, thus enlarging the customs tax base.
4. Tax authorities are focusing on enforcement of indirect taxes: Tax audits are changing. Tax and customs inspectors are increasingly using modern technology tools to access real-time comparative figures and data when auditing businesses. They are sharing more information, and tax administrations around the world are implementing electronic auditing of businesses’ financial records and systems.
In many cases, taxpayers’ information is under scrutiny even without an on-site audit taking place. New developments in technology and e-auditing are also paving the way for mandatory electronic invoicing and electronic filing of tax returns, which are fast becoming the global norm.
See which regions of the world are most affected by each of these trends.