VATupdate Newsletter Week 08 2025

BOATRACE

Once upon a time, a US company and a Japanese company decided to have a competitive boat race. Both teams trained diligently, refining their techniques, and optimizing their performance. When race day arrived, both teams felt confident.

The Japanese team won by a mile.

The American team was devastated. Morale plummeted, and Corporate Management demanded answers. A “Continuous Measurable Improvement” team was established to investigate the defeat and recommend corrective actions. Their conclusion: The Japanese team had eight people rowing and one person steering, while the American team had one person rowing and eight people steering.

Sounds familiar? And that’s not the end of the story yet.

Determined to avoid another embarrassment, the American Company Steering Committee engaged a prestigious consulting firm to analyse their management structure. After extensive research and millions of dollars in fees, the consultants confirmed the obvious: “Too many people were steering and not enough were rowing.”

To address the problem, the company restructured its management approach. They implemented a system with four Steering Managers, three Area Steering Managers, one Staff Steering Manager, and a new performance review framework designed to “empower” the sole rower. The goal? To boost productivity and achieve their Total Quality Management objectives.

The following year, the Japanese team won by two miles.

What went wrong here? Again, the story continues.

Faced with yet another crushing defeat, the aerospace company took decisive action. They fired the rower for underperformance, sold the paddles, cancelled all investments in new equipment, scrapped plans for a new boat, awarded a “High Performance” certificate to the consulting firm, and distributed the remaining budget as bonuses to senior executives.

Now, you may be wondering—what does this have to do with VAT?

Well, the way some businesses approach VAT compliance isn’t much different from the American boat team’s strategy. Instead of streamlining and simplifying VAT processes, companies often create layers of management, complex reporting structures, and convoluted workflows. They hire consultants to analyse the issue, implement sophisticated control mechanisms, and introduce new performance metrics—without addressing the root problem. Meanwhile, the real work—understanding the VAT rules, accurate VAT reporting, compliance, and strategic tax planning—gets buried under bureaucracy.

As VAT regulations evolve, especially with digital transformation and real-time reporting on the rise, businesses need to rethink their approach. It’s not about adding more steering managers; it’s about making sure there are enough rowers in the boat.

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