According to research conducted by Vertex, a global provider of tax technology solutions, the approach to indirect tax compliance by almost three quarters of global businesses is risk prone. Seventy-four percent of global businesses report accepting indirect tax compliance risks, in relation to their company’s tax compliance strategy.
Commenting on the findings, Vertex senior director of VAT, Peter Boerhof, said: “The attitude to indirect tax compliance by businesses everywhere is concerning, particularly when the technology exists to mitigate many risks being taken. If businesses haven’t taken account of indirect tax properly, especially in Europe where the VAT rate can be up to 27%, this can have a detrimental effect on profit and brand reputation. Tax authorities will always catch up with a business, and the financial impact of non-compliance can be huge.”
The research surveyed 580 indirect tax decision makers from global companies with an annual revenue of at least $50m (£39.4m) and found that 74% of respondent’s businesses were accepting compliance risks. In comparison, only 16% of businesses were risk-averse with their indirect tax compliance strategy. The remaining 10% were neither tolerant nor averse to taking risks.
The survey also revealed that 62% of respondent’s businesses have been found to be publicly non-compliant, meaning errors were found following government investigation or audit. Additionally, 84% of the tax decision makers said they feel personally exposed by the current level of indirect compliance within their business.
Regional differences in attitude to risk are stark. 90% of the survey’s U.S.-based respondents considered their business to be risk prone, whereas just 56% of respondents from Southern Europe (France, Italy and Spain) felt the same. 72% of respondents in the UK and Ireland believed their businesses to be risk prone.
However, when asked how they would define their business’s current indirect tax capabilities, 43% of U.S. respondents describe their organisation as a ‘champion’ – meaning protected and futureproofed, whereas just 29% of respondents from Southern Europe say the same. Conversely, 25% of respondents from the UK and Ireland define their business as a ‘crawler’ – meaning compliance is slowing their business down.
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Vertex EMEA director for solutions marketing, Gunjan Tripathi, concluded: “For me, the most troubling element of this research is how many respondents from around the globe feel personally exposed about the level of risk being taken by their business in relation to indirect tax compliance. From a duty of care perspective, willingly exposing tax teams to this level of risk seems unwise and warrants further consideration.”