Looking to overcome the omnichannel challenge? Tax technology is the missing piece of the puzzle
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

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

Looking to overcome the omnichannel challenge? Tax technology is the missing piece of the puzzle

Sponsored by

sponsored-firm-vertex-logo.png
aisle-3105629.jpg

Peter Boerhof of Vertex illustrates tax technology’s ability to assist retail businesses with navigating omnichannel complexities.

Although omnichannel retail has roots dating back to the millennium, recent years have seen the strategy explode into a top priority for retailers. Today, expectations of the customer are ever-changing and following the pandemic, demand for quicker and more integrated retail solutions has soared. Having an omnichannel solution that meets the needs of retailers and consumers alike can be a key differentiator in remaining competitive in the modern retail landscape.

An omnichannel retail strategy refers to a business approach that integrates multiple channels and touchpoints to provide customers with a seamless and consistent shopping experience. It focuses on creating a unified and interconnected customer journey across various online and offline channels, such as physical stores, websites, mobile apps, social media platforms, and more. An omnichannel strategy aims to enable customers to interact with a retailer or brand through their preferred channels, seamlessly transitioning between them while maintaining a cohesive experience. The strategy recognises that customers may start their shopping journey on one channel and complete it on another and aims to eliminate any barriers or inconsistencies that might arise during this process.

However, numerous retailers are experiencing challenges within this space, particularly when it comes to establishing their tax obligations. According to research commissioned by Vertex in collaboration with Retail Systems, which surveyed 102 key retail decision makers, just 5% of retailers have fully automated their systems for tax purposes across all jurisdictions they operate in. So, what impact does this have on their efforts to fully embrace an omnichannel strategy to achieve their growth ambitions?

The complication of tax jurisdictions

With customer demands in the eCommerce space evolving to wanting the flexibility and accessibility of being able to buy whatever they want, wherever they want, unsurprisingly many retailers are looking to expand into new territories to bolster their customer base.

When implementing an omnichannel strategy, businesses must account for country-specific VAT requirements. VAT regulations mandate retailers to register for VAT and collect the appropriate taxes from customers. This ensures accurate tax calculation and collection across various channels, such as online, in-store, and mobile, becomes crucial. Additionally, maintaining pricing consistency is essential, as VAT rates vary across products, from country to country, and even within regions of the same country. Through all the channels retailers must display prices inclusive of VAT while delivering a consistent customer experience.

With geographical expansion comes a wealth of tax complications, with each territory requiring registration with the relevant tax authorities and strict policies to comply with. For example, the EU alone has numerous tax laws and regulations across its 27 member states, meaning there is no one-size-fits-all solution for trading with European nations. Survey respondents agree; 61% believe their biggest hurdle to expanding into new geographies is registering with the respective tax authorities, and 45% believe that incorrect VAT on invoices is a major risk for compliance.

The picture this paints is one of great turbulence for the retailer. Expansion into new territories may be deterred due to the complexity of registering with the relevant tax authorities and being non-compliant runs the risks of hefty financial penalties. And yet, just 13% of respondents are currently rolling out tax calculation software which is making achieving tax compliance and managing tax across multiple geographies a notable challenge. Evidently, retailers are failing to reap the benefits of tax technology across their omnichannel setup, despite the fact modernising functions and moving towards more digitalisation would improve their ability to trade cross-border.

With two-thirds of respondents expressing difficulty registering with the numerous tax authorities as they look to expand into new geographies, and just a small number of retailers adopting tax technology, this seemingly links to the fact that almost half of respondents have reported incorrect VAT on their invoices. Tax technology solutions offer valuable assistance in addressing these VAT-related challenges in an omnichannel strategy. These solutions ensure accurate tax calculations across channels by leveraging VAT calculation engines and automated streamlined compliance processes, thus reducing the burden of manual tasks. Retailers can generate compliant invoices, receipts, and tax reports, aligning with country-specific documentation requirements.

Furthermore, tax technology provides real-time updates on changing VAT regulations, alerting businesses to rate changes, thresholds, and compliance obligations. This enables retailers to stay compliant and where needed adjust their systems accordingly. For those engaged in cross-border transactions, tax technology solutions simplify VAT compliance. They facilitate registration in new territories, handle tax calculations for different jurisdictions, and assist with reporting obligations.

Omnichannel is here to stay

Although the traditional brick and mortar store is not going anywhere, and retailers are adapting to the changing demands of their customers by providing a seamless shopping experience, it’s clear that an omnichannel strategy is fundamental for retailers to survive in today’s digital-first world. It’s a lucrative strategy to ensure growth ambitions are met and with more retailers looking to expand their customer base into new territories, cross-border trade is flourishing.

However, unless retailers utilise tax technology and have a clear tax transformation strategy in place, they will continue to experience major hurdles in their attempts to enjoy the fruits of a frictionless commerce experience. Although 33% of respondents are planning their tax automation strategy, it’s clear that most retailers still have some way to go in order to fully automate their tax systems across all regions. Retailers that adopt tax technology will benefit from the continued evolution of both customer and regulatory demands that exist with the modern omnichannel world, and ensure that their growth ambitions remain on track.

more across site & bottom lb ros

More from across our site

The reported warning follows EY accumulating extra debt to deal with the costs of its failed Project Everest
Law firms that pay close attention to their client relationships are more likely to win repeat work, according to a survey of nearly 29,000 in-house counsel
Paul Griggs, the firm’s inbound US senior partner, will reverse a move by the incumbent leader; in other news, RSM has announced its new CEO
The EMEA research period is open until May 31
Luis Coronado suggests companies should embrace technology to assist with TP data reporting, as the ‘big four’ firm unveils a TP survey of over 1,000 professionals
The proposed matrix will help revenue officers track intra-company transactions from multinationals
The full list of finalists has been revealed and the winners will be presented on June 20 at the Metropolitan Club in New York
The ‘big four’ firm has threatened to legally pursue those behind the letter, which has been circulating on social media
The guidelines have been established in the wake of multiple tax scandals and controversies that have rocked the accounting profession
KPMG Netherlands’ former head of assurance also received a permanent bar and $150,000 fine; in other news, asset management firm BlackRock lost a $13.5bn UK tax appeal
Gift this article