EU VAT Management

Last autumn, the European Commission unveiled a package of proposals detailing its plans for an all-encompassing reform of its value added tax (VAT) rules that have been in place for 25 years.

As global companies monitor this proposed overhaul, along with other sweeping regulatory shifts concerning corporate tax requirements, tax functions are busily assessing the current state of their VAT management processes and technology and how easily these resources can be adapted to satisfy new rules.

Input from tax professionals who attended a tax technology conference, TaxTech, held in London late last year, sheds sobering light on the current state of VAT management. The majority of conference attendees – indirect tax executives and managers – work for companies that operate in 40 or more countries. Here’s how those global tax leaders described their current VAT management capabilities:

• 66 per cent said their ERP systems are either “not well-configured for VAT” or are only “adequately configured for VAT;”
• 40 per cent said they did not have standardised VAT management processes within their EU operations;
• 94 per cent indicated they rely on spreadsheets as a primary supporting technology for VAT compliance; and
• 63 per cent described their current tax compliance risk as “medium” or “high.”

The EU’s likely VAT reform and other global regulatory changes concerning tax will compel companies to produce more tax data, more frequently. The survey results above suggest fulfilling this “more tax data, more frequently” mandate may be hindered by subpar processes and technology. One way to improve those areas is by treating VAT management as a cycle of three interlocking processes (tax determination, compliance and audit, and data management and analytics) – as this post describes.