Want to assess the ROI for indirect tax automation? Consider all the hidden costs of international tax compliance

Life in the indirect tax world is changing rapidly – so much so that it has become an international sport to stay on top of all the legislative changes and filings methods/requirements needed to simply continue operating a business. With many businesses operating in different countries, it can become a (highly arduous!) full time job - on top of the actual day job.

To get around this we often see teams outsourcing compliance or looking to deploy software inhouse - this, in turn, frees up internal resource, allowing a focus on other tasks that are seen to contribute more value to the business. With different elements to consider, both tangible and intangible, it is no wonder businesses struggle with working out the cost implications of their indirect tax compliance. Want to know the true cost of getting compliance right in today’s environment? Read on... 

We have noted that there are various factors that often get missed when considering the return on investment (ROI) of a new indirect tax compliance strategy. A business may simply view these elements as the cost of ‘getting the tax position wrong’ but is this actually the case? If these ‘hidden costs’ are factored in to the ROI then their mitigation should be considered part and parcel of indirect tax compliance and your preferred method, be it insourcing, outsourcing or indeed a lovely mix (after all, one size really does not fit all).  

What do we mean by “hidden costs”? 

The typical kinds of hidden costs (both from a time and cash perspective) we have come across when speaking to our customers include the following:

• Time spent preparing for and attending a tax audit 

• Fines from Tax Authorities  

• Third party consultant costs for last minute advisory or compliance issues

• External filing services 

• Translation services

• Keeping on top of tax changes/content for current markets and new markets

• Data cleansing 

• Error checking

• Sample invoice checking

• Manual processes 

This is not a complete list, but these are all valid elements of any business case for change. The proposed reduction of time/effort/cost for these in ‘current state’ versus ‘future state’ scenarios should be considered for a complete picture. 

How can I evaluate my hidden costs? 

Avalara can help you reduce the burden of complying correctly and has worked with customers to enable them to achieve significant cost savings and efficiencies in a range of areas when looking at the indirect tax compliance options.  

For example, when looking at implementing an in-house VAT solution, we have seen the following benefits achieved within organisations: 

• Reduction in time and effort for VAT return preparation of up to 70%

• Up to 100% reduction in outsourcing costs if choosing an in-house tool

• Reduction in audits fines and penalties is on average 75% reduced.

• Headcount reduction (will vary organisation to organisation)

We have a ROI tool for all of our principal products to help you build a business case and determine what your current cost is versus your future dream state for indirect tax compliance.