Automating the Tax Tangle
Introduction – exports in the spotlight
By Kid Misso, Senior Director Solutions Consulting, Avalara
Tax is woven into the fabric of how businesses buy, sell and move things. This complex and quickly evolving area of business is linked closely to macro-economic trends such as the boom of e-commerce and the emergence of new digital business models, which are transforming the nature of global trade and supply chains.
Exports are of vital importance to any open economy and are worth £511 billion to the UK economy (in gross terms). The government is capitalising on this global connectivity to urge businesses to make 2017 the ‘Year of Exporting’, encouraging them to expand their horizons to new markets and seize the demand for British goods and services as part of a new global policy focus. Exports and global trade are a key route to growth for the country, though international trade operations will likely become more onerous when the UK leaves the EU and its associated customs union.
“Within this setting it is important for UK exporting firms to find new sources of efficiency gains to remain competitive”
The challenge of doing business across multiple markets is that VAT becomes considerably more complicated, the more countries you deal with. Every single transaction has tax implications, and registration, invoicing and filing can be a silent but significant burden if not managed appropriately.
Despite this, we know that 80% of UK businesses still rely on spreadsheets to keep track of their international VAT obligations. This is a time consuming, and generally error prone way to map such a crucial area of finance.
Our research with CEBR shows that manual VAT compliance costs UK exporters at least £2-3 billion per year. This failure to take advantage of technology is costing them their competitive edge and limiting their contribution to UK GDP. This level of inefficiency and wasted productivity is a particular concern given the global shifts towards greater transparency and real-time VAT reporting, which will present fresh challenges for both existing systems and in-house expertise.
A ‘typical’ sizeable UK exporter stands to benefit from a £72,500 net reduction in yearly-allocated cost due to the automation of international VAT compliance
Businesses can no longer afford to overlook the productivity gains that technology can offer to help them maximise their profits, and compete on a global stage.
Kid is the VP Product EMEA. He has over 15 years of specialist experience in indirect tax automation.