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Many economies around the world continue to struggle with growth – often sluggish at best. At the same time, there is ever-increasing focus over the tax paid by some of the biggest businesses in the world; a debate that is at times emotionally charged and tends to overlook the other consumption-based taxes that flow from the goods and services supplied, such as VAT/GST.
Further, tax authorities all over the world are showing much greater interest in evaluating how a business’ tax affairs are governed.
For example, current tax authority risk assessment programs in Australia, the Netherlands and the UK explicitly address the strength of a business’ tax governance policies. Specifically, in the UK, senior accounting officers of large businesses must annually certify that their tax systems and controls are adequate.
Against this backdrop of continuous challenge – both economically and fiscally – the survey shows:
• CFO’s continue to view the effectiveness of their tax department through the lens of corporate tax with little or no focus on VAT/GST. Eighty-three percent of all respondents still have to establish VAT/GST performance goals that are visible and meaningful to the CFO. Now with increasing government focus on taxes calculated on consumption rather than profits, CFOs would be wise to think more objectively about how their businesses are managing this real-time tax.
• There is a significant shift towards tax departments taking ownership or accountability for VAT/GST globally. In 55 percent of all respondents (rising to over 70 percent in the case of larger businesses), the tax department is now accountable for VAT/GST. Having a clear understanding of who is accountable for VAT/GST in a business is the starting point for effective VAT/GST management. However, having the title without the appropriate infrastructure in terms of people, process and technology could give a false sense of security.
• Sixty-four percent of businesses do not have a Global Head of VAT/GST and the survey shows there has been no obvious, commensurate increase in headcount either at a global, regional or local level in the last year. Alarmingly, 21 percent of businesses do not have any full-time VAT/GST specialists.
• There is greater evidence of quality VAT/GST management in Europe, the Middle East and Africa (EMA). In Asia Pacific (ASPAC) and Latin America (LATAM) businesses should be concerned about how compliance risks are being managed.This is particularly important in these regions given the complexity of their VAT/GST regimes.
• Outside of EMA, more than 50 percent of respondents have not identified the key VAT/GST risks in their business. For those businesses that have identified the key risks and have processes and controls in place to manage those risks, 16 to 23 percent of respondents across all regions rate their ability to manage the risks as poor.
• Given the scale of VAT/GST throughput being handled by global businesses, significant opportunities are being missed to manage risk more efficiently and effectively, improve cash flow and reduce bottom-line cost.
• Businesses with effective VAT/GST management are still in the minority.There is a very long way to go before the resources, processes and technology strategies are embedded and accountabilities set to adequately manage the global VAT/GST challenges. Given the rapid pace of change – expected to continue through 2013 and beyond – even the more advanced businesses are simply running to stand still, while others are falling further behind.