This site addresses indirect tax function effectiveness and sets out the ‘Why’, ‘What’, and ‘How’ of managing an effective indirect tax function. Simply put, Indirect Tax needs to be managed because the VAT throughput increases due to increased VAT rates globally. VAT errors – as it is a transactional tax – impact profit margins negatively and could beside tax risks result in commercial and reputational risks as well (see also sections: ‘Why Managing Indirect Taxes‘ and ‘A roadmap to a sound ‘Audit Defense’ Strategy‘).
Beside the ‘Why’ it is important to know ‘What’ needs to be managed within an organization. For change of roles and responsibilities (e.g. governance and mandate) involvement of senior management is essential. From benchmark studies it follows that indirect tax is low on the priority list of senior management.
The question then becomes: what approaches and optimal practice tools are available to change that mind-set and achieve the indirect tax objectives?
A starting point in increasing indirect tax function effectiveness is to set clear and realistic objectives. Is being fully VAT compliant a realistic goal? An answer will be given. In addition, an overview is provided that could be used as a guideline (including activities and examples) to set SMART objectives.
A summary – first chapter subdivided into the following sections:
Via quotes of benchmark studies performed the current state is explained from an overall Indirect Tax management perspective. How is indirect tax perceived by senior management and what is the root cause? An overview is given of the impact of VAT in general and non-routine and significant business transactions that always need timely management. Realizing indirect tax objectives contribute added value to the company’s business objectives as for example hidden operations are reduced (hrs spent on rework). However, in order to change mindset or company’s culture re indirect tax involvement of senior management is essential.
This sections deals with prioritization and gives answer ‘Why’ time should be spent only on indirect tax risks that exceed the company’s risk appetite. What are misperceptions and how deal with these in daily practice? When objectives are set it is important that proper tools are available to realize set objectives. A roadmap is provided including templates of a VAT Strategy 2014 (including performance requirements), VAT Risk Profile 2014 and VAT strategy Plan (long term).
This section deals with building the business case and defining the problem statement for senior management and how a VAT Throughput calculation can support when used in the right way. Measure is important and tools like statistical sampling, data analytics, ERP reviews could be used not only to quantify amount of risks, but as well to understand its root cause.
This section is about understanding senior management, communicate a problem statement, write a business plan with the right elements and achieving mutual responsibility to optimize internal buy-in.
This section is about cost benefit and deals with the question how much money is saved when the problem is eliminated. The section contains a template with non-exhaustive examples as well the definitions of various savings (hard, soft and potential).
- Table of content
- A roadmap to indirect tax function effectiveness
- Why is management necessary and what needs to be done?
- How to realize objectives via best practice approaches, tools and methodology
- How to increase indirect tax function’s effectiveness
- Achieving stakeholder satisfaction
- Writing a business case / problem statement and calculate Return on Investment (ROI)
- Planning of non-routine transactions
- Building Blocks of an Indirect Tax Strategic Plan
- Indirect Tax Risk Management
- Building Blocks of a VAT Control Framework
- Data and Technology
- Change Management
- Key Performance Indicators
- Risk Management
- Rules of the game
From test phase to go live
- Test phase – prelaunch to selected audience [done]
- Receiving feedback [open]
- Evaluate feedback [ongoing]
- Remediate and improve [ongoing]
- Write introduction how to use site and forum [work in progress]
- Official Launch [expected soon]