Richard Cornelisse

Change company’s indirect tax culture for the better

In Business Strategy, Indirect Tax Strategic Plan, Processes and Controls on 16/07/2014 at 12:00 pm

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Customer satisfaction is achieved by managing the expectations and relationships of internal customers, tax authorities, external auditors and other stakeholders.

1174766_40509785To evaluate your role in customer service, you should define first your customer, both external and internal.

Who depends on the indirect tax service?

Everybody who receives a service or a product is a customer. This includes end users, other departments, subcontractors, and regulators.

Assume therefore that a Tax Function of a company works under the same market principles as external tax advisers and that the in-house customers are senior management, finance, procurement, IT, logistics, internal audit, HR, legal, etc.

We have to ensure that the internal processes meet customer requirements on every level; and that to the extent an internal service provider is also a customer, their requirements have to be met as well.

It seems according to Big4 surveys that senior management consider indirect tax of lower priority than the indirect tax function generally does.

Is the root cause misinterpretation, not understanding and speaking the same language or is from a senior manager’s perspective indirect tax risks already at an acceptable level?

To achieve mutual understanding – it will be important to get agreement with senior management what the level of indirect tax risk appetite actually would be of the company in a worst-case scenario.

If you know the risk appetite, you have to identify the lowest performing indirect tax processes that have the most direct impact on the company’s business objectives.

  • Identify the key indirect tax processes, measure their effectiveness and efficiency, and initiate improvements of the worst performing processes
  • Identify a problem, measure its magnitude, determine why the problem exists, and generate a set of solutions to ensure that the problem goes away.

Short problem statements for the gaps found should be written. They should include an estimate of savings or the amount of hours currently lost due to rework. These statements can subsequently be prioritized and validated with senior management.

Various solutions are presented with cost-benefit analysis, so a constructive discussion with senior management can be held about what is needed to close these gaps (e.g. budget and/or resources needed or necessary for change of systems, processes and controls etc.).

In the worst case the gap(s) will not be closed, but at least you have achieved mutual awareness and hopefully responsibility. However, if the problem is material and addressed in the right way it will more than likely be dealt with accordingly, because it has now become a mutual responsibility as visibility exists why a higher level strategic business objectives are not being met and senior management should see the need to start fixing broken processes.

A good way to estimate the potential value of a project/solution is to imagine how much you could save if the problem was completely eliminated.

  • Hard Savings: reduce expenses and result in financial improvement
  • Soft Savings: financial benefits that may occur, but are not a direct result of the product, solution etc
  • Potential Saving: are hard savings but require some action or decision to be become realized (e.g. go ahead after feasibility study)

An example of a Taxmarc™ ‘Return on Investment‘ overview

return-on-investmentBy Richard Cornelisse

 

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