• Register
Return to: Home > announcements > New risks for business as indirect tax regimes sweep the globe

New risks for business as indirect tax regimes sweep the globe

Press release by EY

Press release by EY - More countries than ever are adopting indirect tax regimes as they respond to revenue shortfalls and digital innovation, according to EY's Indirect Tax in 2016 - an in-depth review of indirect tax developments and trends across more than 100 jurisdictions. The report also finds that the global trend for increasing indirect tax rates continues, and identifies new risks for businesses adapting to unparalleled change in the tax landscape.

More than 160 countries are now levying value-added tax (VAT) or goods and services tax (GST) to boost revenue. New indirect tax systems have been introduced in a number of countries, most notably Puerto Rico from April 2016 - the first US jurisdiction to introduce such a system. China, the Gulf Cooperation Council countries and India among others, have also announced major changes to existing arrangements, further widening the net of levies across the globe.

The unprecedented rise in VAT and GST rates is also continuing globally, despite signs that rates are becoming more stable - or even slowing - in parts of Europe[1]. Notably, excise taxes have increased on alcohol and tobacco in numerous countries over the last 12 months, and many have broadened the tax base, or plan to do so. The report finds that the rate hikes are in part due to global trends such as low oil prices, which are requiring governments to offset tax losses.

Gijsbert Bulk, EY's Global Indirect Tax Leader, says: "The indirect tax landscape is seeing huge changes, which brings with it new complexity and cross-border liabilities. New rules and regimes create greater risk of non-compliance, and it is now more important than ever that companies monitor the impact on pricing and margin holistically across the business."

Rise of digitization and data collection brings great change and new risks
The report highlights the impact of digitization in driving jurisdictions to find new ways to draw revenue. The advent of digital consumerism has brought tax losses on low-value, cross-border purchases that do not meet the levy threshold, and governments are now taking protectionist measures in response. And as the purchase of physical goods increasingly gives way to downloads of digital products such as e-books, governments are scrambling to develop innovative rules to levy taxes.

Accordingly, more jurisdictions are implementing electronic auditing, and the amount of data collected is growing exponentially, placing greater administrative burdens on business. Increasingly, governments are seeking information about transactions in real-time, bringing new complexities for businesses using multiple distribution channels and making it more challenging for companies to control their own data. With technologies such as "block chain" becoming more widely adopted, this trend is likely to continue.

Bulk says: "A lack of coordination across geographies, and increasing administrative burdens, present new pitfalls for business and increase the urgency for a uniform, global approach to the application of indirect tax systems. Companies need to establish a proactive and robust indirect tax strategy to keep up-to-date with this rapidly changing climate."

Top Content

    The UK: uncertain waves rule Britannia

    he UK’s accountancy profession is currently in a period of much uncertainty. The Competition and Markets Authority (CMA) has released its review into the listed audit market which could cause the biggest shake-up the profession has seen in years, the Kingman Review has described the Financial Reporting Council (FRC) as not being fit for purpose and called for it to be replaced. All the while the country remains in a deadlock on Brexit negotiations.

    read more

    Views from the Eurozone

    With Brexit looming, populist governments gaining footholds in a number of countries and movements such as the Yellow Jacket protests in France, 2018 was anything but a quite year for the eurozone. Here leaders report to the IAB on their markets.

    read more

    Eastern promise and how to find it

    With China rising as a global power, Jonathan Minter spoke with ShineWing’s Zhang Ke and Marco Carlei at the World Congress of Accountants 2018 in Sydney, to discuss the cultural challenges that occur when Chinese networks look beyond their border, and the dividends available for those who overcome them.

    read more

    Spain: looking to widen demand

    As Spanish accounting professionals prepare for new audit regulations, the Paul Golden asks what they need to do individually and at firm level to maintain and increase demand for their services.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.