Driving Indirect Tax Performance 

A common purpose

Achieving a common purpose means having an indirect tax strategy which contributes to the overall strategy of the business. It should deliver business wide awareness and understanding of the indirect tax strategy and clarity on the roles and responsibilities of the indirect tax department and other business units. The potential benefits of having such a common purpose are that business units across an organization should manage indirect tax matters in a consistent manner which can enable clear communication with tax authorities and other stakeholders regarding the business-wide indirect tax policies and practices.

Embedded processes

Having embedded processes means having common processes and controls over indirect tax risks which are implemented consistently across the business. Embedded processes provide greater accountability and responsibility and help to minimize errors in a standardized, preventative manner. Together with appropriate technologies, embedded processes can provide robust assurance to all stakeholders that indirect taxes are being managed effectively.

High performing teams

Having a high performing indirect tax team means having a team which recognizes its role within the organization, has the required level of technical, management and other skills and is appropriately trained, motivated and rewarded. One of the most significant issues in managing indirect tax for all businesses is that responsibility is dispersed throughout the organization. Management and staff in a diverse range of business units, such as sales & marketing, IT, logistics, finance and administration all contribute in a material way to the entire end-to-end indirect tax compliance process.

Timely and accurate information

Having timely and accurate information means more than simply having the correct VAT / GST information in time to meet compliance deadlines. It also means having confidence in the underlying financial information on which VAT / GST returns are based. This can provide the indirect tax function with the ability to minimize non-productive time seeking to obtain and verify data and frees up time and resources to focus on value creation initiatives. Having confidence in the accuracy and timeliness of the information also provides a robust starting point in relation to the handling of tax authority audits. When combined with the ability to demonstrate the existence of the correct embedded processes, this can greatly assist in quickly providing assurance to tax authorities and other stakeholders regarding the accuracy of VAT / GST reporting.

Enabling technologies

Enabling technologies means developing and implementing indirect tax information systems which are integrated into the financial and other reporting systems of the business. Rather than relying exclusively on traditional means of producing indirect tax information, new technologies can be employed to provide more robust, cost effective and auditable information.

Enabling technologies are not exclusive to taxpayers – tax authorities globally are also updating their audit approaches and are adopting standard and bespoke interrogation software to assist in their audit work. It is critical that businesses are prepared for more sophisticated tax authority audit techniques, requiring ongoing assessment of the their system and periodically undertaking self reviews to identify potential errors or queries which may arise in the event of a tax authority interrogation of the system.

One view of performance

One view of performance means that there is a single business wide information system and framework by which to assess it. This should help to eliminate the risks associated with different parts of the business operating with different versions of the same information. It also provides a means of evaluating the indirect tax function, and evaluating indirect tax risks and decisions, which is consistent with the rest of the business. Achieving one view of performance should result in the development of clearer KPIs for the indirect tax function and the business generally.

Influencing stakeholders

Influencing stakeholders involves the development of a two way communication process between the indirect tax function and the key internal and external stakeholders. Internal stakeholders typically include the CFO, the Board and members of the “shadow indirect tax team”. External stakeholders typically include shareholders, regulators, tax authorities, customers and suppliers. There is a growing appreciation that there is a need for enhanced visibility and transparency of indirect tax within organizations.