Businesses do't pay enough attention to VAT

Harris & Co Northampton chartered accountants who specialise in advising small and medium sized local businesses report that most CFOs are failing to pay sufficient attention to identifying and managing the impact of indirect taxes, despite evidence that governments are using them more widely and rates are set to rise, according to research by KPMG.

The third annual edition of the firm’s Benchmark Survey on VAT/GST found 83% of all respondents (compared to 77% in 2012) do not have VAT/GST performance goals visible and meaningful to the CFO.

In addition, the survey shows that 64% do not have a global head of VAT/GST. Where such a post exists, the UK is the most popular location, with 37% based here, followed by 17% in Germany, 12% in the US and 6% in Switzerland.

Although the results indicate tax departments are taking stronger ownership and accountability for VAT/GST, with 55% doing this compared with 51% in the previous year, KPMG’s research suggests that resource levels for work on indirect taxes are falling. Respondents reported fewer full-time VAT/GST employees (21% in 2013 versus 26% in 2012).

Outside of Europe, the Middle East and Africa (EMA), more than 50% of those surveyed have not identified the key VAT/GST risks in their business, KPMG found. For those that have, 16% to 23% of respondents across all regions rate their ability to manage these risks as poor.

Gary Harley, KPMG head of indirect tax, said:

‘With VAT/GST often the third largest cash throughput managed by business after sales and cost of sales the survey shows little resource is allocated to its effective management. We believe focus and investment will enable businesses to better comply with the requirement to collect these taxes and manage the risk around incurring penalties more effectively, improve cash flow and thus reduce bottom-line cost.’