Indirect Tax management has traditionally been considered an independent compliance function best left to the experts. However, forward-thinking companies are increasingly recognizing the value of integrating the tax function with day-to-day business operations as a strategic partner to the business. Aside from meeting stringent regulatory requirements, the indirect tax function owns a veritable treasure trove of information – data on every aspect of the business.
Where does your company stand?
To meet the myriad of challenges in today’s increasingly complex financial climate, companies must be prepared and take a proactive approach to the indirect tax function. How does your business measure up? Assess your company’s position in regard to indirect tax’s role in operations:
- Is the indirect tax function meeting today’s challenges as well as getting ready for those that lie ahead?
- Does it have the capacity to take on new responsibilities while efficiently performing tax compliance and financial statement obligations?
- Is it fully supporting the needs of the business, including responding quickly to planning requests that require analysis?
- Is it briefing the C-suite prior to shareholder meetings or press conferences?
- Does the cost structure of the indirect tax function align with the variable and growing needs of the organization?
Best practices for transforming Indirect Tax into a strategic partner
Change of internal mindset and shift of internal priorities: For the tax function to become an integral part of the business, its potential must be fully utilized. As keepers of vast amounts of organizational and transactional data that can be used for valuable and actionable insights, the tax function must be considered a vital window into the company’s operations. Yet, according to a PwC survey of manufacturing companies, only 15% of respondents said they frequently use business intelligence tools that would allow them to analyze tax data, and 57% reported no use at all of such tools.
Investment in tax technology tools: Traditionally, tax data was manually captured and reported in multiple spreadsheets and loaded into compliance tax software tools. With the emergence of financial technology (FinTech) tools, it is now possible for the tax function to access and integrate with the technological infrastructure of the entire company. Automation and artificial intelligence solutions further increase the relevance of the tax function by enabling efficient processes at scale.
Integration of indirect tax and other business data: Tight integration of all finance and business functions with Indirect tax is imperative in today’s era of transparency and increased diligence on the part of tax authorities. As of 1 January 2018, the EU Tax Info Exchange Rules allow national tax authorities to obtain direct access to information on the beneficial owners of companies, trusts, and other entities, along with information on bank account balances, interest income, and dividends. They also have access to the customer due diligence records kept by companies. Failure to integrate tax data with other financial information can cause financial statement errors, tax refund delays, and negative publicity. Strong collaboration between tax and finance executives can help companies identify potential problems and opportunities, including strategies to meet compliance requirements and improve risk management.
Raise visibility amongst external stakeholders: By digitizing and integrating the tax function, a company can begin to better engage outside stakeholders. The Organisation for Economic Co-operation and Development (OECD)’s base erosion and profit shifting (BEPS) Action Plan has raised the bar for transparency by mandating that multinationals self-disclose standardized metrics. The higher the levels of transparency, the better positioned the company in the eyes of its stakeholders.
Reduce risk of audits: With the European Parliamentary Research Service reporting that tax fraud costs the EU anywhere from €550 to €70 billion per year, governments are engaging in unprecedented information sharing in order to assess risk and identify targets for audit. Tax audits are expected to rise dramatically as a result. Involving Indirect Tax at the earliest stages is an effective and proactive measure to take in avoiding the risk of audits.
Build public trust: In light of recent highly-publicized tax scandals, there has been a decline in public trust, particularly in large enterprises. To address public concerns that some multinationals are not carrying their fair share of the tax burden, higher levels of transparency are required to increase public understanding and awareness. Providing a clear window into a company’s tax position plays an important role in building trust.
Drive proactive decision-making: Once the tax function is better integrated with the rest of the enterprise, a company can begin to use tax information to drive strategic decision making. Tax data can be used to determine T&E policies, best-value suppliers, pricing decisions or how to reduce the cost of filings. Using tools such as forecasting, trend analysis, modeling and peer benchmarking, the tax function can become a value-added business partner, and an important contributor to proactive planning.
Summary: To compete successfully and prepare for the future, enterprises must remove the tax function from its silo and view it as a strategic partner, one that helps set business priorities and gives the company a competitive edge. For help with integrating Indirect tax into your company’s strategic operations, VATBox can help. VATBox, an automated, enterprise-wide, cloud-based VAT recovery solution, has successfully streamlined the expense management and global VAT recovery process, providing businesses with unrivaled visibility, compliance, and data integrity, and ultimately boosting its bottom line. Let us show you how your company can thrive in today’s complex financial times.