Frederic Raepers works from an office in Turkey, yet as a knowledge manager in KPMG’s Global Indirect Tax practice his working brief is international. “My role is to gather knowledge and information on indirect tax issues from all over the world and to help customer-facing individuals within KPMG firms to turn it into value for the benefit of their clients,” he explains. Together with the publications produced by the Global Team, Frederic shares commentaries on the latest news published by local practices directly with clients via the Global Indirect Tax website. It’s a role that reflects the growing importance of indirect taxation. One of the trends of the last few decades has been a shift in the balance between direct and indirect taxation, with governments raising an increasing proportion of their revenues via mechanisms such as VAT and goods and service tax (GST).
There are good reasons for this. Governments see VAT and GST as tax collection mechanisms that are less open to avoidance and evasion than, say, corporation tax. Based on transactions, these taxes are collected throughout the year, thus providing governments with a steady stream of revenue. It’s also believed that the inflow of money to the public purse is less susceptible to changes in the economic climate.
Adapting to change
Governments’ growing reliance on indirect tax has had implications for companies at a domestic and international level. For a business trading in a single jurisdiction, complying with indirect tax regulations can be a significant burden. For businesses trading internationally, the challenge is to manage tax risk and stay on top of changing regulations across multiple jurisdictions. “And that has implications for KPMG’s advisors,” says Frederic. “Increasingly, clients talking to our local teams will be talking about transactions all over the world and they will expect their advisors to provide information quickly on indirect taxation issues.”
In some cases, clients have centralized their tax operations and the processing of their indirect tax returns. Responding to this trend, KPMG has recently set up a KPMG’s Indirect Tax Compliance Center in Hungary. “It’s our job to make sure that those people, who cover about 30 jurisdictions, are aware of any changes that could affect their work,” says Frederic. “It’s a demanding job in terms of the information they require.”
KPMG’s work with Ford Europe emphasizes the importance of a global perspective on tax law, regulation and practice. Much of that perspective comes from Frederic as he monitors developments not only in individual countries but also across trading blocs such as the European Union. Their information comes from government sources and the courts where new laws are interpreted in terms of practice. “We might be looking at legislation or a court case of a local authority decision,” says Frederic.
Mostly provided by national KPMG firms, this information is pooled by Frederic to create an international knowledge base from which information is available to all KPMG indirect tax professionals around the world via the web, weekly newsletters and individual contacts.
Working in indirect taxation
Indirect tax advisory work has become a discipline in its own right. “When I joined KPMG, new recruits tended to deal with all kinds of tax, but that has changed,” says Frederic. “Today, things are changing so fast that we need people to look at indirect taxation 100 percent of the time. Within the European practices there will normally be VAT specialists and in the biggest practices this might be broken down further into specific industry sectors, say, retail or financial services.”
The Global Indirect Tax team attracts professionals from a range of backgrounds. Economics and law are the usual starting points, although many people have arrived from accountancy. “The key skill is the analytical ability to, say, look at the outcome of a case and draw the right conclusion about what it means for the daily business of our clients,” says Frederic.
Indirect taxation is far from a specialist backwater. “The shift we are seeing from direct to indirect tax means that people with skills in this area are going to be in demand.” Frederic adds, “This in turn creates career opportunities, as there will be plenty of scope for indirect tax specialists to move up the hierarchy.” At the moment, the focus is in Europe where VAT is long established, but as Frederic observes, developments in other major economies are also generating opportunities. “India and China are implementing VAT and the US may introduce it the near future,” he says.
As any Financial Director will tell you, indirect tax creates its own problems and risks, which tend to multiply when trade is carried out internationally. Professionals working in KPMG’s Global Indirect Tax team play a key role in helping companies with an international presence to resolve their tax issues.