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| NEWS CENTRE |
SHIFTING THE DIRECT/INDIRECT TAX BALANCE |
1. PWC:
On 1 October 2008, PWC announced that it is launching a global survey of how Indirect Taxes are managed and measured around the world. The survey is entitled “Shifting the balance from direct to indirect taxes - How is it managed by Multinational Companies?”
2. ERNST & YOUNG:
With several surveys on Indirect Taxes around the world, E&Y have already found that “the environment for indirect taxation has become increasingly complex, with businesses having to invest more and more in tracking and accounting correctly for VAT/GST, and increasingly recognising that, far from being a ‘workthrough’ tax for business, the error rate in VAT/GST imposes high costs in management time and reduces cash flow, which impacts on shareholder value”.
Their surveys also “reveal a surprising tolerance of failures to track, fully report and legitimately reclaim indirect taxes”.
3. KPMG:
In July 2008, KPMG’s own “Survey of Global Indirect Taxation” (July 2008) analysed how indirect taxes are currently being managed, the level of investment and priority being given to this area of taxation and the concerns of global businesses for the future. The survey notes that “some of the key messages include:
- VAT is increasing in importance globally
- Finance Directors have a very high level of concern about the management of global VAT risks within their organizations, and
- Significant bottom line improvement opportunities are being missed.”
4. CONCLUSIONS:
Graeme Ross of KPMG’s writes in an article in International Tax Review No. 18: “It makes sense for various reasons to shift the balance from direct to indirect tax.”
Applicable to worldwide tax authorities at the time (2004), it now applies to all businesses and their Finance Directors as well. For not only does VAT account for nearly twice the amount of Corporation Tax raised in the UK, but VAT has also becoming increasingly complex and more closely monitored as the result of widespread and pervasive “Missing Trader” frauds.
So, as we approach 2010 when many new fundamental changes are due in the VAT system, VAT risk is increasing and few businesses can afford to let hard-earned profits slip away through unreviewed VAT errors. If you need to review your VAT position (including reclaims of overseas purchase VAT), please do not hesitate to contact us.
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