- KPMG survey reveals business still not prepared to deal with people, process and technology needs essential to coping with indirect tax
- Research finds only a third of businesses surveyed have a global head of indirect tax but among those that do, the UK is the most popular location for them
VAT, GST, Sales, Consumption—whatever you call it—‘indirect’ tax is here to stay. More jurisdictions will continue to adopt them, the scope of many already in place will broaden, and world-wide rates will continue to increase.
However, the third annual edition of KPMG’s Benchmark Survey on VAT/GST shows that businesses are not still prepared to deal with the people, process and technology needs that are essential to indirect taxes.
The survey shows that 64 percent of the 249 tax executive respondents do not have a Global Head of VAT/GST – although where they do have a global head, the UK is the most popular location for them: 37 percent are based here, followed by 17 percent in Germany, 12 percent in the US and 6 percent in Switzerland. Additionally, the respondents are responsible for accomplishing more with less. In 2013, they have fewer full-time VAT/GST employees (21 percent in 2013 versus 26 percent in 2012).
Given the scale of VAT/GST throughput being handled by global businesses, significant opportunities are being missed to manage risk, improve cash flow and reduce costs by avoiding incurring penalties and fines for compliance errors.
Many CFOs continue to view the effectiveness of their tax department through the lens of corporate tax with insufficient focus on VAT/GST. Eighty-three percent of all respondents (versus 77 percent in 2012) do not have VAT/GST performance goals visible and meaningful to the CFO. Now, with increasing government focus on taxes calculated on consumption rather than profits, CFOs should consider how their businesses are managing this real-time tax.
On the positive side, there is a slight shift towards tax departments taking stronger ownership and accountability for VAT/GST. Last year, 51 percent of respondents said the tax department had overall accountability versus 55 percent this year. Having a clear understanding of who is accountable for VAT/GST in a business is the starting point for effective VAT/GST management.
Outside of Europe, the Middle East and Africa (EMA), more than 50 percent of respondents have not identified the key VAT/GST risks in their business. For businesses that have identified the key risks and have processes and controls in place to manage them, 16 to 23 percent of respondents across all regions rate their ability to manage these risks as poor.
“CEOs, CFOs and Heads of Tax are managing a heavy burden of tax risks, from regulation and compliance to issues such as tax transparency and morality. However, business should recognize that governments are taking an increasingly aggressive stance to the collection of indirect taxes that are so important to fiscal budgets,” said Gary Harley, Head of Indirect Tax, KPMG in the UK. “With VAT/GST often the third largest cash throughput managed by business after sales and cost of sales the survey shows little resource is allocated to its effective management. We believe focus and investment will enable businesses to better comply with the requirement to collect these taxes and manage the risk around incurring penalties more effectively, improve cash flow and thus reduce bottom-line cost.”
For more information and to view a copy of the 2013 Benchmark Survey on VAT/GST, please visit kpmg.com/benchmark.
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For more information, please contact:
KPMG in the UK
+44 (0) 207 694 4246 / +44 (0)7920 274856
+1 416 777 3857
About the 2013 Benchmark Survey on VAT/GST
About KPMG International
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 156 countries and have 152,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.