With COVID-19 disrupting the economy, companies are being forced to review their business and internal process strategies to overcome the crisis and adapt to the new normal. To get an inside view of the corporate business climate, PPG Industries – an American Fortune 500 company and the leading global supplier of paints, coatings and speciality materials – is sharing how it takes advantage of digital tax transformation opportunities in the aftermath of the pandemic. In this interview, Jiří Vrzala, VAT Compliance Manager at PPG Industries, shares his candid thoughts with Remco Dewaerheijt, VP Tax & Product Strategy for VATBox, on the journey, PPG Industries and his team are pursuing to optimise business processes by tax digitisation.
Listen to the full podcast below:
Technology to the rescue
As PPG operates in more than 70 countries around the globe, its busy EMEA 14-member VAT team has long recognised the importance of embracing technology to facilitate VAT compliance. This positioning helped PPG’s Czech-based Shared Service Centre regroup in the face of COVID-19. Even though working from home was not a standard procedure for the 450 employees across the different SSC departments, once the pandemic hit and the majority were required to work remotely, there was no traumatic transition; rather, a solid IT infrastructure allowed the employees to connect remotely efficiently and securely.
Tax technology mitigated the entire process. The VAT department already automated the data extraction process from most data sources – including data coming from AP, AR, General Ledger, logistics, and SAP Concur – into their in-house developed VAT Compliance solution. With this automation in place, the PPG VAT team was able to adapt to the new situation flawlessly and channel their efforts into supporting the increased focus on business continuity.
Focus on cash flow and cost reduction
Many companies have been prioritising cash flow and cost reductions to ensure business continuity during the current crisis. Jiří explains that when the crisis emerged in Asia, PPG realised the need to take defensive measures. “We started looking at our budgets to find potential savings.” When the pandemic spread to Europe, especially in Italy where PPG has significant operations, the discussion about cash flow heated up. He says, “PPG has approximately 5000 VAT related submissions a year in the EMEA region alone. While we always have been cash flow savvy, now at a rapid pace, tax authorities started announcing all kinds of deferment schemes, with all having their own merits. Senior management pushed all business units and functions to optimise the cash flow position of the company, harnessing itself for, what was at that time, still a pretty unknown future. In such a crisis, PPG once more showed itself to be a well-oiled and flexible machine despite its enormous size. The message of the senior management was clear: Cash is King. The tax department had to contribute its part toward optimising PPG’s cash flow. We opened the dialogue with several different tax administrations and quickly were able to apply for and implement the payment deferments offered, which were an important contributor to PPG’s cash position.”
Benefits of process optimisation via automation
Making processes more efficient will always be beneficial to business operations. Jiří says that automation has allowed his team to now spend 4-5 hours on tasks that in the past, took them 2-3 days. He says, “The actual preparation of our VAT reporting is automated. The extraction of the data from our main ERP systems — currently, we are using SAP and Oracle – runs through automatic schedulers. The extracts are then uploaded into our in-house automatic VAT compliance solution using partial RPA, which then in turn, prepares all required VAT reports in different formats for Quality Control and country-specific submission processes. This process saves us much time, and moreover increases the quality of the data processed and reported. Where possible, we try to eliminate repetitive manual work so that the tax specialists can provide much higher added value.” Using technology has helped the VAT team to centralise and standardise the processes around VAT compliance and drive down the average costs per return significantly, year-over-year.
PPG also utilises an automated solution for VAT refunds in partnership with VATBox. The technology automatically processes foreign and domestic VAT refunds on the companies’ travel expenses. He says, “Although the VATBox solution has been proven to be a reliable and steady cash contributor to our company, especially in these days, VAT refunds are more important than ever to support the current increased focus on cash optimisation and cost reduction.”
Existing and future technology opportunities
Jiří shares that because the Tax Compliance department was already pioneering and implementing digital processes several years ago, he is therefore not worried about having to further adapt to the digital processes increasingly implemented by tax authorities. PPG chooses to keep their compliance solution in-house, which helps them to be as flexible as possible when needing to react to externally dictated changes that are often announced or published only last minute. This requires the company to react quickly, and the PPG systems and solution must have the flexibility to comply with these new requirements.
With VAT recovery, PPG has been utilising VATBox technology for the past six years. As their VAT recovery processes are already digitised, PPG can easily analyse the VAT potential in their employee-driven transactional data and forecast the financial long-term impact.
In the near future, PPG is planning to consolidate the current ERP landscapes of Oracle and SAP, to one single ERP system and upgrading to SAP HANA, the VAT team is heavily involved to ensure that proper VAT determination and VAT reporting will be supported.
How in-house teams can adapt to a changing tax landscape
SAF-T and e-invoicing are two digitalisation initiatives that impact tax reporting and tax compliance. Instead of data flowing from the supplier to the customer, nowadays the data could flow directly to the tax authorities, possibly even in real-time. Jiří shares that when the latest tax solutions were implemented, his team had to pivot from being solely tax-focused to being more IT-focused. For example, He says, “To comply with SII, we had to look at the tax code and instruct IT exactly how we wanted them to map our ERP to the new solution. The result is that we are more and more experienced with IT solutions. I recognise this as the way forward for tax administrations as well. For example, I foresee Spain moving to pre-filled VAT returns using SII data sooner rather than later. So being able to work with all these different systems and understanding the flows of data is the future of our work.”
The role of IT knowledge in the hiring process
With the tax department’s focus on digitisation, has there been a fundamental change in the hiring practices for PPG’s tax team? Jiří shares that he looks for both areas of expertise in the candidate. “I’m focused on the tax knowledge, but also want to see the candidate’s willingness to learn and understand automation. So if someone is studying taxes and accounting and the person tells me during the interview that he or she can also show some experience in programming, then the person is much more interesting for me. ”
Changing the relationship with tax authorities due to COVID-19
Tax authorities themselves are contending with the pandemic as well, with most staff working from home while still trying to help their country get through the crisis. Jiří states that he has seen some positive changes in the ways of working and communicating with the tax authorities. He gives an example of discussions he has had with HMRC in the UK over webchat, or conversations with the authorities in the Czech Republic over the phone to ask questions and resolve issues. He says in the past they were reluctant to communicate in ways other than formal written communications, so he sees the change as positive, making it easier for both sides.
Personal views on tax technology in the post-COVID-10 era
Jiří advises his peers to be open to the opportunities that new IT solutions or innovations can bring. He also says, “Look for the right candidates that combine the skills of tax and IT. The tax roll of the future must have a mix of financial and IT expertise; they will need to be creative and open-minded to embrace the inevitable changes. More and more processes will be digitalised; we must start thinking in an IT kind of way! I heard some time ago that our job profile would disappear in a couple of years. I don’t think so. I think that our job will change in that we will be 50% tax and 50% IT. We should be ready as tax teams are already starting to accelerate.”
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VP Tax & Product Strategy
Using his extensive experience as both a tax lawyer and an in-house VAT expert, Remco leads the Tax Knowledge team and VATBox’ European Headquarters in Amsterdam. Before joining VATBox, Remco led the VAT team of PPG Industries and advised mainly US clients at Baker & McKenzie on how to optimise their European VAT supply chain. Remco holds a master’s degree in Taxation and is a certified tax advisor.