Some findings of KPMG Benchmark Survey 2012. Access the benchmark report via the link.
It is again an interesting read!
- “Sixty-three percent of global businesses do not have a Global Head of VAT/GST. Which begs the question – who is responsible for managing this increasingly complex, challenging and financially significant global tax obligation and do they have appropriate skills and resources?
- The survey further shows that the majority – 59 percent – only have between one and 10 full-time employees (or equivalents) focused on indirect tax worldwide and one-quarter of respondents have no full-time equivalent VAT /GST specialists at all. Given the scale of VAT/GST under management – in many global businesses, VAT/GST throughput is between $1bn and $10bn- this looks like a serious case of under-resourcing,
- Only 32 percent rate their VAT / GST policies as very good or excellent. Worse still, only 20 percent rate their implementation as very good or excellent. Sounds like most businesses are well behind where they need to be” – KPMG Benchmark Survey 2012
“Given the rapid pace of change, which is expected to continue through 2012 and beyond, even the more advanced businesses are simply running to stand still while others are falling even more behind”. “There is still a very long way to go before the majority of business get the right mix of people, processes and technology in place to are adequately manage the global VAT /GST challenges. In the meantime, CEO’s, CFO’s and Heads of Tax really need to appreciate the nature and level of risk which is now in the system and the level of opportunity which is being missed.” Niall Campbell, KPMG’s Global Head of Indirect Tax Service
Based on the findings above I refer already to my publication of today for Big4:
“63% of global businesses don’t have a Global Head of VAT/GST – So who is managing this complex and financially significant task, which in some businesses can account for up to $1b-10b?
The latest KPMG 2012 Benchmark Survey on VAT/GST reveals that while the amount of business implementing VAT policies is increasing, there is still a long way to go with only 32% of respondents rating their VAT/GST as good or excellent and only 59% of respondents having between 1-10 full-time employees dedicated to the task.”
The feedback given:
To make it worse. Many multinationals don’t have even a separate indirect tax function as management of indirect taxes is still a part-time job of either (local) finance or head of tax without any full-time indirect tax resources. It is either regional indirect tax leaders or finance or tax or a combination. I have doubts by the way that the first step to improve global indirect tax management is to put someone in charge. Being responsibility without the tools (governance, mandate, budget, resources etc) is like being Michael Schumacher without a car. Not likely you are going to win a Formula One race. I gave my view How To Change The Perception Of C-level And Actually Get Their Support.
Some questions I have. Is it really important that indirect tax issues are reported to a global head if indirect tax? Is that – taking all the benchmark findings in consideration (also beyond KPMG) – at this stage not more a nice to have? Why? The CFO is end responsible and that person controls the budgets and (extra) resources.
A good start point would be if regional indirect tax leaders would truly work together, team up and share with each other their experiences (own internal benchmark findings such as best and worse practices, tax audits outcome and approaches etc) and come up with a game plan. I prefer top down, but sometimes bottom up is good start point. If those regional leaders could get organized – say in the transition – speaking with one voice to C-level in the “Managing The Perception Of C-Level” approach I described in that article – that could make a real difference (change). I agree that a global head could facilitate by the way.
How do you see this? About how I see implementation I refer to Global Indirect Tax Management: The Conditions For Success“
“I think that it can be especially difficult for US HQ’ed multi-national organizations given the US’s lack of a VAT (other than state sales taxes, which are not harmonized nationally.)”
I agree Joe and understand. To facilitate a change of mindset and get support I called my article “Managing the perception of C-level” and I gave my view what needs to be managed within an organization and shared an approach how this could be done. The study of KPMG shows some progress. That is interesting as it makes me really curious. What is the root cause of that progress as we are still in the downturn and budget constraints/being under-resourced as indirect tax function is a fact of life. KPMG Survey 2012: “Given the scale of VAT/GST under management – in many global businesses, VAT/GST throughput is between $1bn and $10bn- this looks like a serious case of under-resourcing”.
Interesting benchmark investigation would be: “how did they succeed where others were not that successful” or is the root cause for these companies simply the downturn why Finance shifted more indirect tax accountability to tax. KPMG Survey 2012: “Accountability for VAT/GST has shifted significantly, with more tax departments assuming ownership from Finance.” “Larger businesses demonstrate higher levels of performance benchmarking and resource allocation to VAT/GST.”
One of my future blogs will be about statistical method, measurement and conclusions drawn.
From an US perspective, do you see already any change because of the US tax reform discussion and the fact that “Value Added Tax Should Be On The Table (Larry Lindsey etc). Food for thought. It triggers the following questions:
- Who is going to be end responsible in the future if a national sales tax is going to be introduced (Value Added Tax based)?
- Who is responsible now if something really (material exposure) goes wrong – say $60 million Indirect Tax assessment in Brasil or India?
- If such an Indirect Tax assessment occurs what would likely be the top management solution to close that gap from a remediation perspective?
All very interesting. In addition, its not just the Global Head of Indirect Tax function that’s sometimes missing – an amazingly large proportion of global businesses still don’t have any in-house Indirect Tax function whatsoever, particularly if the HQ is outside Europe. These last few years, the numbers of organizations recruiting their first ever Indirect Tax specialist has been disappointingly low in comparison to activity levels in the late 90’s, early 00’s. It seems that those organizations that took the plunge then in terms of recruiting in-house Indirect Tax expertise have by now developed effective global Indirect Tax functions, but by and large things haven’t moved on elsewhere as much as one would like (barring some exceptions of course).
Richard Cornelisse is CEO of the KEY Group and worked previously as Big4 Partner in the Tax Performance Advisory and Indirect Tax Practice and blogs on Tax Function Effectiveness and Tax Control Framework developments.
- Indirect Tax Function Effectiveness (indirecttaxtechnology.com)
- How Internal Audit could contribute value in realizing indirect tax objectives? (indirecttaxtechnology.com)
- Taxmarc™: your best SAP solution for Indirect Tax Automation (taxnewsreader.wordpress.com)
- How Internal Audit could contribute value in realizing indirect tax objectives? (richardcornelisse.com)
- Digital Flyer – Taxmarc™ Product Overview (indirecttaxtechnology.com)
- The KEY Group measures Indirect Tax Performance and improves where necessary (indirecttaxtechnology.com)
- Indirect Tax Can Drive Costs For Shared Service Centers (indirecttaxtechnology.com)