- Tax Risk Management: An Overview
- Why VAT is important
- Tax penalties can emerge in several scenarios if VAT regulations are overlooked
- Navigating Self-Billing Legal Requirements in the EU: Ensuring Compliance and Transparency
- VAT/GST risks
- VAT/GST rewards
- Key Trends in VAT Landscape
- E-invoicing and VAT a global trend
- Standard Audit Files for Tax and the Trend of Digital Tax Auditing
- Transforming Tax Audits: How Artificial Intelligence and Machine Learning Are Revolutionizing Tax Authorities' Approaches
- Combating VAT Fraud Through Machine Learning and Predictive Artificial Intelligence
- VAT determination of incoming invoices
- Incorrect VAT numbers
VAT GST risks - Tax objectives and current needs
Page 4 of 7: Tax objectives and current needs
Tax objectives and current needs
The tax function needs to understand the business activities and objectives, including those related to research and development (R&D), and ensure alignment with other departments such as legal, HR, and IT.
The primary goal of the tax function is to mitigate risk and identify opportunities that can support a company's supply chain. Failures in systems and processes crucial for value-added tax (VAT) can lead to overpayments, which represent a real cost to the business, or under-declarations that expose the company to penalties and reputational damage.
The finance and tax departments require access to data showing how transactions are processed and how IT systems are configured. Data integrity is an operational risk when transactions are recorded in any country without proper evaluation for tax purposes.
There may be instances where the financial data in the system does not align with the designed business model, or changes are not managed effectively. Accessing the relevant tax data necessary for reporting to regulators, investors, and tax authorities across all business units and countries presents a significant challenge.
Threats and opportunities: compliance failures, complex legislation, and new tax rules
Managing risk is about making decisions at all levels of an organization to limit the effect and likelihood of threats and to increase the effect and likelihood of opportunities. It is about taking the right amount of the right risk.
- Review the categories of VAT risk the company faces, the likelihood of occurrence, its potential impact, and mitigation measures.
- Review the company's risk appetite, risk tolerance, and how risks are measured.
Lack of the right resources or technology support due to change
Take for example a Shared Service Center. Historically, the activities around transactions giving rise to indirect taxes have been handled by in- country entities that are more familiar with local regulations and compliance requirements and accustomed to the rules and obligations for invoicing, liability, rates, accounting and reporting specific to each of the myriad jurisdictions.
But what happens when VAT and GST functions are transferred to an offshore SSC in a faraway location? How complex will the operational requirements be when one SSC deals with countless transactions that originate in multiple countries and languages and fall under the auspices of various cultures and authorities?
In the new situation, employee turnover is often high, and the local staff are made redundant.