Alex Baulf: ‘It’s time to invest in people and technology’

In this interview, Avalara’s recently appointed Senior Director in Global Indirect Tax, shares his views on changes in the market over the course of 2021, and where he sees the sector moving towards in 2022.

You’ve recently joined Avalara as their senior global indirect tax specialist. Tell us a bit about your role and your background?

I am an international indirect technology specialist, and have been working in global VAT and GST for the last 16 years in both the UK and the US. Prior to joining Avalara, I spent 12 years at Grant Thornton where I led the international indirect tax team and VAT technology and automation service line. There I worked closely with businesses of all sizes, from dynamic start-ups to large multinational conglomerates, to help them navigate the changing global VAT requirements across the world, working together to understand the commercial and tax requirements and advising them on the most suitable solutions to meet their needs.

My experience in this new leadership role will help Avalara continue to grow internationally and develop new innovative and scalable solutions, ensuring our people and customers are aware of the roadmap of legislative changes and the direction of travel of tax authorities and compliance requirements across the globe. I’m looking forward to meeting customers to understand their strategic priorities and indirect tax pain points, as well as engaging with governments, tax authorities and bodies like the European Commission, OECD and IMF.  I’ll also be sharing some regular insights and intel through blogs, social media and speaking at webinars and conferences.

Both the tax and technology sectors have evolved significantly over the course of your career – and over the last two years, accelerated at what feels like break-neck speed. What’s your view on how the sector has shifted?

A decade is a long time in this sector! One of the main changes I’ve seen is historically, businesses focused on local, tactical solutions, where the emphasis was to meet an immediate requirement in one country. Now, tax and finance teams are looking at indirect tax policy, processes and technology solutions more holistically with strategic approaches where careful consideration is given to an organisation’s global indirect tax challenges – looking to implement solutions which are more global and scalable in nature.

What has driven this shift to a more holistic approach?

I’d say it’s twofold. Firstly, the pace of change. We have seen so many changes in the legislative landscape; everything from a new VAT/GST regime. For example, VAT being introduced in a lot of countries which have historically been known as tax havens and haven’t had an indirect tax system in place.

Also, it has been driven by how VAT is collected, administered and reported by tax authorities. The trend in tax digitisation, which is moving away from summary VAT returns all the way through to digital real-time reporting, means that areas such as the SAF-T, the shift to e-invoicing, the submission of tax and transactional data to tax authorities, have really grown. In addition, we’ve seen tax authorities use this information to audit the business to understand more about their profile and risk. As a result, it’s led to a lot of challenges, not just around technology, but it's affecting how businesses operate their processes, the data they hold and how they interact with their customers and their suppliers.

So, a lot of change! In practical terms, how do these challenges manifest themselves within organisations?

These challenges impact different areas of the business. Everything from accounts payable, to billing teams and logistics. We’ve also seen an impact on supply chains such as changes to where goods and services are taxed, as well as changes to the interaction with customs duty, how goods are physically cleared into a country, and when and how VAT is paid.

In practical terms if you want your business to grow and continue to operate across multiple markets, if you haven’t already, you need to be seriously thinking about investing in technological infrastructure and upskilling your people to make the most of the technology and data available to them.

Teams will only be as proficient with the technology and changes we experience if they have the proper skills and training to keep their knowledge and capabilities updated with the new requirements and the impact that this has.

It does require investment, but this should be driven by your business’ specific requirements -  which is the ability to identify the pain points the business is facing, and identifying the gaps against new and changing requirements.

You joined Avalara at the start of November 2021. What struck you as particularly innovative or different here compared to somewhere like Grant Thornton?

One of the big things that has really surprised me is the scale of our business. We operate in so many countries and have amazing people on the ground in markets across the world including in Germany, France, Luxembourg, Romania, Turkey, Brazil and India (and of course London and Brighton - where I am based!). We have a huge footprint and a significant presence across the globe which will continue to grow. Our team in EMEA is close to 400 people now and the talent here is unbelievable.

The other thing I really admire is the ambition and ability to innovate. Not only to stay on top of current changes – but the ability to be one step ahead. One of our strengths is the ability to support customers by having a deep understanding of the direction of travel that tax authorities and governments are taking, and engaging with them to share our experience and insights. As a business, our solutions are both future-proof and scalable. Our acquisition of INPOSIA is testament to this, and now allows our customers to be compliant with e-invoicing requirements in over 60 countries.

What have been the biggest learnings from the past year?

The impact of Brexit has been a major change for many businesses this year. The January 1 2021, of course, saw the end of the Brexit transitional period. Sellers on both sides of the channel had to suddenly get used to operating in a post-Brexit environment. It was hard. For six months, UK businesses were really struggling to sell goods into the EU.

However, fast forward to the July 1, we finally saw the launch of the EU commerce package. This was another huge change for businesses across Europe – and across the world, which  was a blessing for some, simplifying importation, but for others it was a huge change, having to find an intermediary, charge VAT at the point of sale across the EU member states.  While up to 1.2 million sellers were impacted, the marketplaces offered a cushion to the majority by being the ones to charge, collect and remit the VAT from customers using their own IOSS registration number. 

For those who were somewhat prepared, it’s broadly been fairly smooth going but for all there remains a lot of confusion. There are still some issues at the border and challenges with double taxation. In some extreme cases, goods being blocked at customs and instances where customers are having to pay import VAT to customs to unblock the goods to receive them, even though VAT has already been paid at the time of sale.

Concerns over the fraudulent use of IOSS numbers has also been an issue. Thankfully, this is something the European Commission are aware of and they're already looking into solutions.

What can we expect in 2022?  What trends do you see emerging?

In relation to ecommerce, the changes we’ve seen introduced in the EU and the UK will start to be replicated across the globe. Both the UK and EU followed in the footsteps of Norway, Switzerland, Australia, and New Zealand in removing the import VAT threshold and putting the onus on non-established sellers to register and charge VAT at the point of sale. I suspect this will be a growing trend and I think more and more countries will introduce this model and it will become the new normal.

E-invoicing will also seriously take off - with new e-invoicing systems, pilots and voluntary use in a number of countries including Poland, Slovakia and Romania. Upcoming e-invoicing mandates in Spain, France and Germany have also been announced, so all businesses will now be considering their strategy and looking to implement technology to meet these new requirements.

What can businesses do to stay ahead?

I’d love to say we can all future-proof our businesses for all eventualities, but we know things can change in a moment. However, what we can do is to make sure we’re as best prepared as possible. 

Having better visibility over your supply chains is a good way to do this. It seems very simple but by having clear sales and procurement data which is analysed regularly to identify where your customers are and where you are procuring from will help you to be better prepared to identify risk proactively and respond to new rules, rate changes, and evolving registration requirements and regimes.

I’d also advise businesses to maintain an indirect tax risk log and roadmap, identifying risk areas for the business and proposed and confirmed changes. This will allow the business to prioritise IT changes, technology investment and ensure new processes and procedures are scalable across territories.

When it comes to deploying tax technology solutions, I’d suggest really considering scalability. Instead of trying to play “whack a mole” by buying individual solutions for individual country requirements, think strategically and look to find and implement solutions that will scale - both in terms of  new market expansion but also new tax and e-invoicing requirements. 

Finally, stay on top of news and changing requirements across VAT/GST by receiving newsletters, attending webinars and events. Find a trusted partner to help you stay on top of the changes and help you become compliant.  

If we were to have this conversation in 12 months’ time, what would you like to have happened? 

I’d hope that new requirements and legislation will have been designed and articulated in a very clear and commercial manner by tax authorities. One of the challenges to businesses, particularly if they're not established in a country, is the complexity of legislation. Often, it isn’t available in English or other languages.

There's a lot of legal jargon and this has an impact on the practical applications. A new law or requirement may be new in that country, but generally it won’t be new globally. Tax authorities and governments should leverage best practice and obtain feedback from other countries and from business. So, I'd like to see better engagement with more stakeholders, proactive engagement with foreign sellers, and collaboration with businesses like Avalara who already help tens of thousands of businesses navigate complex VAT/GST and sales tax compliance globally - we have great insights to share.    

Finally, I’m personally looking forward to the EU Commission’s proposals and draft legislation in relation to “VAT in the Digital Age” - hopefully this will provide businesses with a common standard for e-invoicing and a move towards more harmonised digital reporting. The proposals for a single EU VAT registration number and extension of the OSS are also interesting and something to look out for!