VATupdate Newsletter Week 49 2023

Important

As VAT specialist, you and I believe that VAT is the most important tax there is. Actually, we don’t believe it, we know it is.

The popularity of VAT has been rising since 25+ years. If you remember the millennium bug, you probably also remember that at that same time, tax specialists around the world were already saying that transaction taxes, such as VAT, would becoming the leading tax-type for governments and (thus) businesses. From a government point of view understandable, as it’s the largest source of income for many of them (only overtaken by wages taxes), and for businesses as it takes-up a lot of time and efforts to get the administrative requirements in place.

Beginning of this century, there were even discussions going on if the global tax manager of any company should be a VAT specialist, instead of the more common Corporate Tax specialist. Corporate tax is something that only is done once per year, and just applying a percentage to the profits of the company, whereas VAT is embedded in all business processes of a company, and needs to be looked after every day, for each and every transaction. Unfortunately, these ‘promises’ never resulted in VAT people taking-over completely.

In fact, in many companies VAT is still often seen as ‘something operational’. Worse, in some companies VAT is not even part of the tax or finance department, but is dealt with by ‘the administration’, or the logistics department. It’s almost as if the CFO doesn’t want to know about it, as long as it’s dealt with.

The problem is that from the tax authorities’ point of view, VAT is indeed an important source of income, but they simply don’t have sufficient capacity, technology, or knowledge to audit all the companies or all their transactions. Although there is a huge trend towards real-time reporting, it’s going to be a huge challenge to align businesses and tax authorities on which information must be transferred in which format and how often.

In the 90s and 00s, businesses invested in ERP-systems and tax engines, making the reporting more efficient and thus gaining more insight in the businesses transactions and processes. The tax authorities were lacking behind and tried to catch-up by demanding more and more detailed information. In this, they may be asking too much. Technology can help companies in complying with VAT, but it still needs enough people, knowledge, and processes.

For people, hire the right ones, as employee or think about temporary solutions and hire an interim specialist. Processes are probably the most important, so make sure you have a look at them. For knowledge, just make sure you check VATupdate every day.

If you have any comments, questions, or ideas that you want to share with us, please send us an email at [email protected] or leave a comment under the posts of this newsletter on LinkedIn.

VATupdate Newsletter Week 49 2023

WORLD

AFRICA

AMERICAS

ASIA-PACIFIC

EUROPE

MIDDLE EAST

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