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

Preparing to scale? Don’t let tax hold you back

Sponsored by


Peter Boerhof, senior VAT director at Vertex Inc, discusses how tax should take a front seat when it comes to cross-border commerce.

As the e-commerce market continues to flourish, many businesses selling products and services online are making growth a strategic priority. Cross-border commerce, in particular, presents significant opportunities for online retailers to expand their operations on a global scale and boost brand reach.

Research conducted by Vertex supports this trend, with seven out of ten businesses stating that they have increased the number of countries they sell online goods to over the past two years.

Alongside geographical expansion, the majority are also expanding and diversifying their product portfolio, and their channels to market, to take advantage of the online sales landscape.

While the prospect of growth can be exciting for businesses looking to capitalise on the e-commerce boom, it does not come without its complexities. All too often, merchants do not take into account the full breadth of challenges related to cross-border transactions until after they have already decided – or have already begun – to scale their operations internationally.

As a result, indirect tax management too often comes too late in the growth journey, and consequently creates preventable barriers, hampering opportunities to scale successfully.

Why tax needs to take a front seat

Indirect tax management is no easy task, especially when attempting to handle the influx of transactions that inevitably comes with growth. Today’s digital-first buyer expects a frictionless checkout experience; yet with more and more tax authorities introducing new rules and regulations, this frictionless user experience can be challenging to deliver without the right systems and processes in place.

Factoring in all the applicable tax rates and rules in each country, region, and locality is imperative to ensure all transactions are processed correctly, not to mention that all calculations need to be done accurately to remain compliant within each tax jurisdiction.

Tax professionals will already be aware that inaccurate tax rates or not paying the right amount of tax comes with significant risk – including fees, audits, regulatory fines, and tax claims – but there are other consequences. If a business undercalculates a transaction and does not collect the right amounts of indirect tax, it is stuck with an additional financial burden to cover the difference. On the other hand, if a customer is overcharged for taxes, the vendor then (inadvertently) inflates the pricing, impacting sales and the overall customer perception.

What is stalling growth plans?

To understand how indirect tax issues are stalling growth and causing shopping cart friction, Vertex recently surveyed over 700 senior tax and financial decision makers from businesses that make cross-border transactions. While most recognise that the way they manage indirect taxes affects their ability to expand, many are not following best practice, resulting in growth limitations and negatively impacting the quality of their customer experience.

Around 73% of the respondents highlighted that they are finding the constantly evolving tax rules and rates difficult to keep up with, while 54% are concerned about complexities such as indirect tax determination and calculation when entering new geographies. Yet only half are using specialist tax software to manage indirect tax, even though this would deliver the best results.

Surprisingly, many are still using manual processes and spreadsheets (41%) and in-house developed systems (52%) or a combination, which can lead to unnecessary friction and added complexity. Using these methods to handle today’s global sales scenarios can be costly. They are time consuming, error prone, and require internal expertise to update the systems in response to indirect tax and business changes.

And with many tax authorities introducing real-time digital reporting requirements, manual methods are becoming increasingly problematic.

Getting your indirect tax management into gear

Tax plays a vital – albeit sometimes understated – role in delivering frictionless online commerce experiences. Therefore, tax and growth should be treated as part of the same strategy for businesses as every aspect of change will bring about potential indirect tax ramifications. Whether it is a new warehouse location, a new product or service, or a new route to market, extra tax processing and compliance issues are likely to follow.

A frictionless future depends on being prepared to manage the associated complexities at every stage. Yet indirect tax management is often not prioritised, with businesses instead implementing isolated solutions to fill immediate needs. This short-term thinking slows down growth and risks tax complexity outpacing business capacity, which, in turn, introduces uncertainty and risk. Time can be lost trying to figure out what the issues are and how to resolve them and implement solutions. Meanwhile, the risk of being audited for non-compliance increases. Most importantly, opportunities can be missed, allowing competitors to take a lead in the areas the business has prioritised for its own growth.

The good news is that merchants do not have to resolve this indirect tax burden alone. Having the right tax and commerce solutions in place can alleviate many of the complexities associated with ensuring compliance and maintaining accurate tax rates and rules, smoothing the pathway for a frictionless commerce experience wherever a business chooses to trade. Tax teams will no longer have to spend large amounts of time researching the rules of each tax jurisdiction, and if any changes happen, these will be reflected in the tax system instantaneously rather than waiting for IT to build and test updates.

Businesses that recognise that tax has a leading role to play in their growth ambitions and decide to invest in a powerful, integrated tax engine will undoubtedly be in the best position to scale with ease.

Learn more about how Vertex can support frictionless e-commerce and global growth here.

more across site & bottom lb ros

More from across our site

David Pickstone and Anastasia Nourescu of Stewarts review the facts and implications of Ørsted’s appeal at the Upper Tribunal.
The Internal Revenue Service will lose the funding as part of the US debt limit deal, while Amazon UK reaps the benefits of the 130% ‘super-deduction’.
The European Commission wanted to make an example of US companies like Apple, but its crusade against ‘sweetheart’ tax rulings may be derailed at the CJEU.
The OECD has announced that a TP training programme is about to conclude in West Africa, a region that has been plagued by mispricing activities for a number of years.
Richard Murphy and Andrew Baker make the case for tax transparency as a public good and how key principles should lead to a better tax system.
‘Go on leave, effective immediately’, PwC has told nine partners in the latest development in the firm’s ongoing tax scandal.
The forum heard that VAT professionals are struggling under new pressures to validate transactions and catch fraud, responsibilities that they say should lie with governments.
The working paper suggested a new framework for boosting effective carbon rates and reducing the inconsistency of climate policy.
UAE firm Virtuzone launches ‘TaxGPT’, claiming it is the first AI-powered tax tool, while the Australian police faces claims of a conflict of interest over its PwC audit contract.
The US technology company is defending its past Irish tax arrangements at the CJEU in a final showdown that could have major political repercussions.