Case Study: Caterpillar’s Strategy for World-Class

Colin Ager, an industry veteran with 30-plus years of VAT expertise, joined Caterpillar in 2003 as EAME VAT manager, and has subsequently taken on global responsibility for Caterpillar’s indirect taxes. His focus on global VAT and GST, process improvement, and tax automation proved invaluable as Caterpillar developed its strategy for managing its global VAT position.

Mr. Ager realized that as the business grew and expanded globally, the company needed to address VAT strategically – specifically, to focus on mitigating the risk inherit in managing VAT for a large multinational company. Risk management was a critical issue for Caterpillar, and its senior management readily embraced the need to effectively manage global VAT. Mr. Ager and the VAT team first set out to determine how much VAT risk was involved in the company’s business.

Simply stated, every aspect of Caterpillar’s businesses involves VAT. Establishing rigor around the VAT processes to cut risk exposure posed a number of challenges, all of which were magnified by the company’s global scale. Realizing that V A T itself has no real process, but instead is an integral part of many business processes, the team toured Caterpillar’s worldwide locations to identify those business processes impacting VAT. The exercise revealed 43 distinct processes – covering master data, sales, purchases, and more. For each of these a standard – or practice – was established to ensure that the business processes dealt effectively with VAT, with a view to ensuring that the figures declared on the company’s VAT returns are as accurate as possible. This set the framework for establishing best-in-class global VAT management.