Managing the global tax affairs of any company is difficult, but dealing with a company that has quadrupled in size in the past seven years, earns more than a billion dollars in revenue, and risks being caught out by the increasing number of tax rules targeted at digital platforms is enough to make any tax professional lay awake all night.
Fear not, says one such tax director, who does all this with his small team without the clout and resource of the big technology companies.
“I know the Amazon has well over 300 people in their tax department,” says the tax director. “We have 1,500 people worldwide in our company. Six of the people that we have our in our tax department: two in Dublin and four in the US.”
“Every government wants their fair share, and what does that mean?” asks the tax director. “It really means that everyone wants more than what they're currently getting, right?”
“It's really turned the conversation of where is value created.”
Questions of the taxation of the digital economy and value creation are a big talking point. With such a small team, traversing these challenges and others, while also dealing with the challenges that rapid growth and expansion bring, is a daunting task. But the tax director is up to the challenge, as he demonstrates by sharing his top 10 tips.
Tip 1: Use your advisors
It's very important to make sure you're using your advisors. Advisors have people in all jurisdictions. We have six people [in our tax department] whereas we use Deloitte, KPMG, PWC and EY, amongst some other law firms that we use and we're able to get insights into what other companies are doing and how people are looking to use their IP and how people are looking to stay ahead of the game.
Tip 2: Know your business plan
The next thing I think is vitally important is really knowing your business. If you're not involved in the business, you won't be able to really react and do the things that are going to be beneficial for the business. So what's your next product? What's it going to be? Is it going to be a digital product? Is it going to be a mix of a digital and physical good? What's the next jurisdiction that you're going to be going into? Have you ever been in that jurisdiction before? Do you need to put people on the ground, and what does that mean for what your current structure is?
Tip 3: Know your product
That goes along with the supply chain for our business, because we have this all-tangible product that we have to send out to people. We have to worry about what our supply chain looks like. How does that get into country and how do we get it back?
Tip 4: Don’t focus only on tax
Some of these [supply chain-related] answers are not always going to be the best tax answer, but it needs to be something that is going to be the best answer for the customer.
If we are customer focused and we can always find a good tax answer – it may not be the best tax answer, but if it's the best answer overall for our customer, it will ultimately be the best answer for the investor – it will be the best answer for the tax department because then you can sell [that] to your CFO. You can say: ‘We're looking out for the business’. What is good for the business is ultimately going to be good for you as a professional.
Tip 5: Try to avoid the word ‘no’
This is kind of a pet peeve of mine. Often, I see people who always say no. The business will come to you and say, we want to launch this new product in this jurisdiction - No. We want to do X, Y, Z - No.
I think that as tax professionals, we need to find ways to get to ‘yes’. So look for ways within your structure that you have to be able to give the business the answers that they want, and then that will earn you the trust that you're really looking for.
Tip 6: Get involved with what other companies are doing
I'll talk a little bit about what we do at [my company] to try to stay ahead of the game. First we get involved. We try to stay involved in coalitions, whether that is a coalition on a specific tax idea on how the digital economy is taxed, or if there's a specific proposal. This isn't necessarily something to always try to guide what governments are doing but very much for us to be able to [understand] what other companies are thinking and what challenges they're seeing so that we can really try to stay ahead of the game from that perspective.
I found particularly the round tables that we've done [at International Tax Review’s Taxation of the Digital Economy Summit] very helpful to be able to know and discuss what other companies are doing, what their thoughts and feelings are.
Tip 7: Plan for expansion into new jurisdictions – it can even end up helping you domestically
We've also spent many, many hours and days building out matrices based on jurisdictions that we’re currently in and jurisdictions that we may be looking to go in. We do that on a product-by-product basis. We need to look at it and say: This is a subscription business that we do right now. Is that viewed as an information service? Is it an electronically supplied service? Is it, some other kind of service?
Then we figure out how each of those would get taxed. And then we build out a big old matrix. That really helped in the US when we just recently had the Wayfair case. For us, we were ahead of the game. We were ready to be able to react to that, and so that's a big thing that I think will be helpful for all businesses.
Tip 8: Plan some more!
With how the landscape is changing, you need to continually plan. The way that we look at planning is we need to make sure that the plan is sustainable, that it's flexible and that we're not being reactive to what the latest law is.
We are actively planning. The ways that we actively plan may be different than what you do, but these are some suggestions of some things that may be helpful. The things that we look for are where our customers are and how do we best serve them.
Tip 9: Be ready for scrutiny
We're constantly looking at where our IP is. This is a strategically aligned with the needs of the business. Would it stand up to the scrutiny that inevitably, will come? Getting back to the ‘fair share’ concept, is our supply chain right? And are the right people doing the right things in the right places to make the business succeed?
Tip 10: Do what is right
The last thing that we look at from our perspective is does it feel right? In the planning that we're doing, does it feel like we're doing the right thing? Are we really putting substance in the places that we say we're putting substance? Are we doing things that are going to benefit the business? And if we feel like we're not, and we're overstepping those bounds, then we try to do the right thing and we try to step back.
Those are the kinds of things that we look at and that we would encourage you to look at.