Richard Cornelisse

A Roadmap To Indirect Tax Function Effectiveness

In Audit Defense, Benchmark, Business Strategy, EU development, Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls, Technology, VAT planning on 14/12/2013 at 4:15 pm

KEY Group new logo long

This chapter 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: ‘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 – this chapter subdivided into the following sections

Why is management necessary and what needs to be done?

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).

How to realize objectives via best practice approaches, tools and methodology

This sections deals with objectives and approaches.  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).

How to increase indirect tax function’s effectiveness

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.

Achieving stakeholder satisfaction

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.

Writing a business case / problem statement and calculate Return on Investment (ROI)

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).

See Forum

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: