World VAT/GST News January 2019

What Will the Global Tax Landscape Look Like In 2019?

What business leaders needs to know to navigate the rocky tides of tax in 2019. 

From UK Chancellor Philip Hammond’s announcement that the country will tax digital companies’ revenues in 2020 to Brexit and its potential impact across the EU and beyond, the future of international taxation is uncertain and risky. In addition, the increasing likelihood of real-time taxation requirements in some jurisdictions and the impending implications of new tariffs all raise questions for the tax world. 

With the foreseeable changes and shifts expected to take hold in the coming year, the global tax environment will be as dynamic and challenging as ever. Here’s what your business needs to know to navigate the rocky tides of tax in 2019.  

Debating a global tax on the digital economy

The debate over taxing large multinational tech companies has been developing for months, with lawmakers and finance experts weighing in with varying levels of concern and interest. While the UK plans to tax companies with over 500 million pounds of revenue from digital services, EU finance ministers, the OECD and other entities are looking into different options. While the result is unknown, the reality of digital tax isn’t. If the OECD doesn’t act by 2020, the UK’s plan will go into effect. The bottom line is that in some form, countries will act unilaterally.  

Further impacting the tech world is the growing discussion of tariffs and global trade. Tax and tariffs are intertwined and the conversation about tariffs on U.S. and Chinese goods - most recently focused on technology - is constantly changing. While outcomes are currently up in the air, it’s inevitable that there will ultimately be an impact on tax. 

A global game of chess is being played and companies need to prepare for the outcome. MNEs can be certain this will include many fiscal shifts and tax changes and relatively confident that at some point in the next few years this will mean the creation of a new form of tax on digital services—requiring a new approach to measuring revenues. Regardless of the changes that occur, all companies need to have effective tax technology in place to help navigate inevitable changes and the unpredictability of tax.

Economic uncertainty around Brexit may change the fiscal panorama

The next year will be crucial to assessing the impact of Brexit on companies and their future plans. No matter what happens, there is always potential impact on the EU, so businesses should expect to face new regulatory regimes and legal implications to both tax and trade. Multinationals should begin evaluating Brexit’s potential impact on the entire fiscal panorama in the face of a contracting global economy.

If Brexit decisions are completed in the near future, what will the tax impact look like? While there’s much up in the air, indirect taxes, such as VAT and perhaps, excise and customs duties, will likely see a greater impact than direct taxes. Consequently, extra administration and compliance costs may also rise because of new oversight, collection procedures and revised cross-border protocols. 

Regardless, the global impact of Brexit on business operations will be significant with a definite impact on both domestic and international taxation. MNEs need to ensure they have tax technology in place that can help them navigate unpredictable changes—particularly technology that can strengthen end-to-end VAT management. End-to-end VAT automation from determination to data analytics to compliance can allow tax professionals to focus on more strategic efforts, rather than ensuring they’re accurately calculating tax.   

It’s time to get serious about real-time reporting 

Real-time reporting and taxation will likely continue expanding in 2019, placing greater demand on multinationals. European countries believe in the potential of real-time taxation to help close tax gaps and increase revenue by improving tax reporting accuracy and visibility into business transactions. 

To comply with real-time reporting requirements, companies must be able to calculate the right tax almost immediately, making automated tax technologies and the ability to quickly and accurately collect tax data increasingly important. As global tax authorities demand an ever-increasing volume of data, technology that produces accurate, real-time, transactional level data should be a top priority for companies in the coming year.  

For all the pending changes of 2019, multinationals must assess if their existing processes and technologies are prepared to handle new internal and external challenges. With so many potential economic transformations going into the new year, the tax department should work with the C-suite in evaluating related risks and developing a plan in response. The best way to accomplish this is with accurate, reliable tax data and automated tax technology that enables tax professionals to focus on these strategic discussions. The value of leveraging tax technology to drive greater efficiency, improve tax processes and manage risk goes far and wide.

The above information was kindly provided by Michael Bernard, Chief Tax Officer at Vertex, Inc. and George Salis, Principal Economist and Tax Policy Advisor at Vertex, Inc.

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Disclaimer:  The information contained in the present page is general and does not constitute legal advice. Before taking any decision or action on the above information you should take the appropriate professional advice.