How to design and embed an indirect tax strategy that works from go-live — and keeps a business compliant, commercial and in control.
A VAT/GST strategy is a documented plan for how a business manages indirect tax compliance, risk and planning, aligned to its wider commercial strategy. When implemented correctly, it enables a new business function to operate effectively from go-live: moving inventory, generating sales and invoices, facing fewer disputes with non-paying customers, staying tax-compliant, and integrating on time and on budget.
Businesses need one because scrutiny from senior management, tax administrations and regulators is rising, and an error in the accounts can trigger major tax assessments, substantial penalties and reputational damage. The fastest route is KGT's six-stage roadmap — scope, workshop, draft and approve, roll out, choose formats, then review continuously — supported by clear governance, roles, processes and controls.
- An indirect tax strategy is a dynamic framework, not a static document, and should cover every business location.
- It must be aligned to the overall business strategy and signed off by the Board.
- Big Four surveys strongly suggest that indirect tax control mechanisms remain inadequate at many businesses.
- A documented strategy brings clarity on risk appetite, consistent decision-making and stronger governance overseas.
- KGT's roadmap moves a strategy from paper into practice in six connected stages.
01 - What is an indirect tax strategy?
An indirect tax strategy is a documented plan that sets out how an organization manages VAT/GST compliance, risk and planning across all of its locations. A strategy, in the broadest sense, is simply a plan or method for achieving a defined goal — and it rests on management's responsibility to identify the organization's key processes, measure their effectiveness and efficiency, and improve those performing least well.
For leading companies, a tax strategy is not a static document but a dynamic framework shaped by both internal and external drivers. An indirect tax strategy, in particular, should extend to every business location and be aligned with the overall business strategy, rather than sit alongside it as a separate exercise.
- DEFINITION — INDIRECT TAX STRATEGY: A documented, Board-approved framework defining a business's VAT/GST risk appetite, governance, roles, processes and controls, aligned to the overall business strategy and reviewed regularly to maintain consistent minimum standards.
02 - Why do businesses need a documented VAT/GST strategy?
Faced with increasing scrutiny from senior management, tax administrations, and other regulators, many businesses now formally document their tax strategy and implement structured processes to evaluate and approve planning ideas. The stakes are high: managing risk is about making decisions at every level of an organization to limit the likelihood and impact of threats, while improving the likelihood and impact of opportunities.
The warning signs are visible in the market. Benchmarking a tax function against global surveys is valuable because it shows what peers are facing and how to improve. Yet, according to Big Four surveys, the control mechanisms surrounding indirect taxes remain inadequate in many businesses. An error in the accounts can lead to major additional tax assessments and substantial penalties — and at that scale, the damage to a listed company's reputation can be devastating.
03 - What are the benefits of a documented indirect tax strategy?
Documenting an indirect tax strategy delivers value on several fronts. Above all, it clarifies the business's appetite for indirect tax risk, which in turn makes it far easier to identify planning opportunities that genuinely align with the company's wider commercial objectives.
The most commonly cited benefits are:
| Benefit | Why it matters |
|---|---|
| Risk-appetite clarity | Identifies planning opportunities aligned to wider commercial objectives. |
| Consistent process | Provides a consistent, efficient way to review and evaluate tax matters. |
| Higher profile | Raises the visibility of indirect tax with key business and finance stakeholders. |
| Stronger governance | Monitors and strengthens controls in decentralised and overseas jurisdictions. |
| Better systems | Surfaces improvements in indirect tax systems, processes and controls. |
| Resource visibility | Highlights where additional indirect tax resources or funding are required. |
04 - How do you build and roll out a VAT/GST strategy?
The preparation and roll-out of a VAT/GST strategy is best approached as a sequence of connected stages rather than a single event. KGT's roadmap moves from scoping through design and into ongoing review, so the strategy is not only written but genuinely embedded in how the business works.
- Initial scoping. Confirm the relevant stakeholders and clarify the project's objectives. The Board's expectations on indirect tax performance and its risk appetite should be established at this stage, since they shape everything that follows.
- Stakeholder workshop. Hold a workshop with indirect tax and key business and finance stakeholders, covering business strategy, risk appetite, what each stakeholder needs from Tax, the function's objectives, and how planning will be evaluated and reviewed.
- Draft and approve. Draft the indirect tax strategy document, review it, agree it with key stakeholders and have it approved by the Board so it carries authority across the organization.
- Roll out. Roll the strategy out to the entire tax team and wider business — typically through workshops and conference calls with Tax, Finance and the business — to create a shared understanding of risk appetite and acceptable planning.
- Choose the right formats. Decide how the strategy will live: an intranet document, an interactive decision tree for evaluating planning, hard-copy guidance manuals, and the organizational, process and system changes needed to move it from paper into practice.
- Review continuously. Review and update the strategy and its documentation on an ongoing basis, with regular assessments of its effectiveness.
05 - What should an indirect tax strategy document cover?
A complete strategy reaches well beyond compliance. The group's overall approach to indirect tax compliance, risk management, and planning should be clearly documented, signed off by senior management, and reviewed regularly, supported by an effective communication plan so that every affected entity understands and commits to it.
Business strategy and objectives
Document and challenge the overall indirect tax strategy so its linkage to the business strategy is clear and the value it contributes to wider objectives is explicit.
Risk management
Define the indirect tax risk management framework covering processes inside and outside the tax function, including a group risk register and oversight of decentralized and overseas locations. Set clear risk-tolerance parameters and apply them to all significant transactions.
Governance and performance
Define the principles, policies and Board approval process; describe reporting lines and frequency up to the Head of Tax, CFO and Board/Audit Committee; set KPIs for the function covering people, efficiency, growth and quality; and state who has authority to deal with tax authorities on audits and penalties.
People and organization
Set out roles, responsibilities and reporting lines for the Board, CFO, Head of Tax, business units, finance, the tax function and local teams. Define the skills and resourcing required in each location; document career development and succession planning; specify training for staff and awareness training for other functions; and provide guidelines on the use of external advisers and on alignment with business units through service-level agreements.
Process and controls
Cover the review and approval of non-routine and significant transactions before execution; compliance and financial reporting across all jurisdictions; the internal audit program for indirect tax; the role of indirect tax in finance and business systems and upgrades; the integrity of data used for filings; detailed operating workflow and information management; and document retention and archiving for both paper and electronic records.
What is the difference between an indirect tax strategy and a tax policy?
A tax policy states what the business will and will not do; an indirect tax strategy is the broader framework that sets the risk appetite, governance, roles, processes and controls needed to deliver that policy in practice across all locations.
Who approves the indirect tax strategy?
The strategy should be signed off by senior management and approved by the Board, then communicated to the wider business through a structured roll-out and change-management plan.
How often should an indirect tax strategy be reviewed?
It should be reviewed and updated on an ongoing basis, with regular effectiveness assessments, because it is a dynamic framework shaped by changing internal and external drivers rather than a static document.
Which functions should be involved in indirect tax planning?
Beyond Tax and Finance, stakeholders such as procurement, IT, logistics, internal audit, HR and legal should seek indirect tax input early, so that significant transactions are reviewed before they are executed.