KPMG 2015 benchmark survey on indirect tax

2015 Benchmark survey on indirect tax

Measurement drives performance and informs leadership of the effectiveness of the indirect tax function. It is, therefore, some cause for concern that only 25 percent of all the respondents say their company has specific metrics, most of which relate to basic compliance, rather than activities that could improve the bottom line and cash flow.

The proportion of respondents with a Global Head of IndirectTax has risen to 38 percent, and to 68 percent for larger businesses, most of which are based in Europe and the US. Regional heads are now gaining greater coverage of Asia Pacific and Latin America, to meet the growing need for visibility and oversight in these complex and diverse regions.

With almost one-third of their time devoted to tax returns, many indirect tax professionals are still mired in operational compliance, rather than strategic activities. Indeed, the proportion of the working day spent on tax planning has actually come down since 2012. Larger businesses, which have invested more in automation and data analysis appear to have a greater focus on value-adding activities.

The proportion of indirect tax teams reporting intoTax has risen from 41 percent in 2011 to 52 percent in 2015. Although visibility over indirect tax activities has also increased significantly over the same period, this is restricted by the lack of global heads and performance metrics.

In all regions, respondents indicate that while local management of compliance remains the predominant compliance model, the centralized preparation of tax returns is expected to become more common in the next three years, with a modest increase in outsourcing. The trend toward central filing is particularly significant for larger businesses.

Respondents from Europe, Middle East and Africa and Asia Pacific appear far more confident in their organizations’ ability to identify key indirect tax risks that could impact cash flow, compared to peers in North America and Latin America. Perhaps of greater concern, key risk identification levels have come down since the 2013 survey. The quality of risk management could be further impaired by the low levels of independent assurance practiced by most respondents, with many preferring self-assessment.

With tax submissions becoming increasingly automated, and companies looking to enhance their data analysis, it’s no real surprise that 67 percent of respondents say they plan to invest in technology to improve indirect tax management. The use of data analytics and tax engines is expected to show a huge increase by 2018.

Indirect Tax

• A lack of metrics can undermine performance. Only 25 percent of respondents say their company has specific metric to measure performance of the indirect tax function.
• A growing trend for global leadership. The proportion of respondents with a Global Head of Indirect Tax has risen to 38 percent (68 percent for larger businesses).
• Indirect tax team remain focused on compliance. Almost one-third of respondent’s time is devoted to tax returns.
• Tax may be taking ownership of indirect tax. The proportion of indirect tax teams reporting into Tax has risen from 41 percent to 52 percent.
• Centralization is increasing. In all regions, respondents indicate that while local management of compliance remains the predominant compliance model, centralized preparation of returns is expected to become more common in the next 3 years.
• Risk Management does not appear to be rising. Risk identification levels have come down since the 2013 survey.
• Technology is the key investment priority. 67 percent of respondents say they plan to invest in technology to improve indirect tax management.