International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Sponsored

Three reasons why indirect tax compliance can stall online sales growth

Sponsored by

sponsored-firm-vertex-logo.png
online-4275963.jpg

Peter Boerhof from Vertex Inc. shares research findings showing that businesses’ indirect tax compliance requirements are hindering online sales growth.

With lingering complexities caused by the international response to the COVID-19 pandemic, ongoing supply chain disruption and the conflict in Ukraine, financial decision-makers have navigated a raft of challenges recently.

Despite the chaos and turbulence, for the commercial operations arms of many businesses across the globe, plans to capitalise on the continuing boom of the e-commerce market and expand into new territories are still a strategic priority. According to research recently commissioned by Vertex, two-thirds of businesses that already make online cross-border trade transactions have increased the number or territories they sell to since 2020.

However, despite the surge in online cross-border trade transactions, there are still major hurdles and challenges that financial decision-makers face as they work to grow their businesses. According to the research, respondents believe that inefficient financial processes and increasingly complex rules and regulations are posing a huge risk to their efforts to scale their online sales.

There are three key reasons why this can have a negative impact and stall online sales growth:

1. An ever-evolving and dynamic tax landscape

As online shopping continues to accelerate, and consumers gain access to a greater variety of buying channels, more businesses are looking to capitalise on the boom of digitalisation and e-commerce in order to maximise their growth. Because of this, tax authorities are pushing through new legislation to collect revenue and establish a level playing field for traditional brick-and-mortar stores.

Of the 700+ financial decision-makers surveyed, 54% believe that the indirect tax complexities associated with entering new markets and geographical territories can act as a barrier for growth and expansion. In today’s uncertain landscape, changing tax rules and rates makes compliance all the more challenging, especially in countries where a business has not previously traded. Half of the survey respondents believe this to be the case.

2. Strict indirect tax requirements

In addition to evolving legislation, tax authorities are also updating reporting expectations: tax teams must now report many of their obligations in real time through e-invoicing mandates and other digital reporting obligations. This can include VAT and sales tax calculations at the digital point of sale, accurate and timely sales reporting, managing multiple filing deadlines, and ensuring that VAT invoices are compliant.

What this means for businesses is that from the first instance, tax determination must be applied correctly, and all data files must have the utmost accuracy. Failing to do this can result in hefty penalties as a result of non-compliance. Of the survey respondents, 46% claim that growth has slowed because of the burdensome management of compliance when it comes to indirect tax.

3. Outdated and cumbersome manual processes

Advancements in new technologies are promising, and six out of ten financial decision-makers stated that new technology will provide opportunities for business scalability. Despite this, manual processes for handling indirect tax management are still the norm for many tax professionals.

As rate of sales continue to grow, this practice is becoming increasingly unsustainable as teams rely on using various legacy systems to handle a multitude of indirect tax obligations. With 51% of survey respondents still relying on native tools in their enterprise resource planning (ERP) systems, and 41% reliant on manual processes and spreadsheets, tax professionals are not armed with the necessary software to handle increasing requirements.

And of course, with manual processes comes extra work. When calculating basic tax functionality, tax teams must carry out extensive research into tax jurisdiction requirements which drains resources and carries a risk of data errors and reporting delays.

The solution: automated tax engines

For more than half of the survey respondents, improving indirect tax management to deal with growing challenges and complexities will help them overcome these barriers so they can accelerate their online sales growth. Sophisticated and cutting-edge tax technology can easily navigate the constantly changing requirements of the tax landscape, while accurately applying correct tax determination to online shopping baskets in real time.

In addition, tax technology can ensure that data is error-free and ready for auditing – meaning that new territories can be entered into confidently and smoothly. Meanwhile, an automated tax engine will ease the burden of tax teams, allowing them to provide increased and valuable strategic insights to help move the business forward.

Complexities surrounding indirect tax management for e-commerce businesses will continue to cause barriers for frictionless trade, but by harnessing the power of an automated tax engine, businesses can bypass the roadblocks and speed ahead with their business growth.

If you’re looking to streamline your indirect tax obligations, learn more about how a tax engine can help here.

Get in touch here.

more across site & bottom lb ros

More from across our site

The BEPS Monitoring Group has found a rare point of agreement with business bodies advocating an EU-wide one-stop-shop for compliance under BEFIT.
Former PwC partner Peter-John Collins has been banned from serving as a tax agent in Australia, while Brazil reports its best-ever year of tax collection on record.
Industry groups are concerned about the shift away from the ALP towards formulary apportionment as part of a common consolidated corporate tax base across the EU.
The former tax official in Italy will take up her post in April.
With marked economic disruption matched by a frenetic rate of regulatory upheaval, ITR partnered with Asia’s leading legal minds to navigate the continent’s growing complexity.
Lawmakers seem more reticent than ever to make ambitious tax proposals since the disastrous ‘mini-budget’ last September, but the country needs serious change.
The panel, the only one dedicated to tax at the World Economic Forum, comprised government ministers and other officials.
Colombian Finance Minister José Antonio Ocampo announced preparations for a Latin American tax summit, while the potentially ‘dangerous’ Inflation Reduction Act has come under fire.
The OECD’s two-pillar solution may increase global tax revenue gains by more than $200 billion a year, but pillar one is the key to such gains due to its fundamental changes to taxing rights.
The solution to address the tax challenges arising from digitalisation and globalisation will generate more revenue than previously estimated.