Businesses Far from Being the Masters in Effective VAT/GST Management
Despite the shift to indirect tax globally a new survey released by KPMG International shows that businesses are simply not keeping pace.
In fact, according to KPMG International’s 2012 Benchmarking Survey on VAT/GST, VAT/GST continues to be “under-resourced, under-managed and under-measured by the majority of global businesses.”
New business models, increased globalization, finance function transformation and rapid legislative change are all putting VAT/GST management under tremendous pressure.
Compliance risks, obligations and challenges are increasing.
But are global businesses reacting appropriately?
Not so, according to the Survey, which has some interesting and potentially worrying findings.
Sixty-three percent of global businesses do not have a Global Head of VAT/GST. Which begs the question – who is responsible for managing this increasingly complex, challenging and financially significant global tax obligation and do they have appropriate skills and resources?
The survey further shows that the majority – 59 percent – only have between one and 10 full-time employees (or equivalents) focused on indirect tax worldwide and one-quarter of respondents have no full-time equivalent VAT /GST specialists at all.
Given the scale of VAT/GST under management – in many global businesses, VAT/GST throughout is between $1bn and $10bn- this looks like a serious case of under-resourcing.
Only 32 percent rate their VAT / GST policies as very good or excellent. Worse still, only 20 percent rate their implementation as very good or excellent. Sounds like most businesses are well behind where they need to be.
On the positive side, many businesses in the survey are on the right track and are implementing policies that set out how VAT/GST should be managed, with an increase evident over last year’s survey results. Forty-seven percent of EMEA respondents have such policies (up from 38 percent last year), ASPAC – 32 percent (up from 12 percent last year), LATAM – 20 percent (up from 12 percent) and 33 percent in North America.
But there is clearly still a lot of work to do as only 32 percent of respondents rate their VAT/GST policies as very good or excellent and only 20 percent scored the implementation of policies as very good or excellent.
In terms of future investment in VAT/GST management, 39 percent prioritized investment in processes, 35 percent prioritized technology and 26 percent prioritized people Implementing the right mix of enhancements in these areas will be critical as the demands on the VAT/GST function increase – ranging from meeting new VAT/GST compliance obligations, managing of more VAT/GST audits, defending against tax authority challenges throughout the world and providing valuable advice to a fast moving business.
“Given the rapid pace of change, which is expected to continue through 2012 and beyond, even the more advanced businesses are simply running to stand still while others are falling even more behind,” says Niall Campbell, KPMG’s Global Head of Indirect Tax Services.
“There is still a very long way to go before the majority of business get the right mix of people, processes and technology in place to are adequately manage the global VAT /GST challenges. In the meantime, CEO’s, CFO’s and Heads of Tax really need to appreciate the nature and level of risk which is now in the system and the level of opportunity which is being missed.”