New research from tax technology company Vertex suggests that up to 75% of global businesses accept a certain level of tax compliance risk in relation to indirect taxes.
The survey, Compliance’s complexity: Attitudes and barriers to getting it right in indirect tax, of 580 indirect tax decision makers from global companies with annual revenue of at least $50m, revealed that three quarters were accepting indirect tax compliance risk, with 84% of respondents saying they felt ‘personally exposed’ by the level of compliance within their business. The data also highlights differences across regions. 90% of US-based respondents considered their businesses to be risk prone compared to 56% of those based in France, Italy or Spain. Businesses in the UK and Ireland fell in the middle, at 72%.
One the challenges for businesses (and, it seems, for tax authorities) is the cost of indirect tax compliance, with respondents estimating that, on average, compliance with regulation costs around 20% of their business’s revenue.
Perhaps more surprisingly, given the perception of non-compliance risk, over 70% of respondents considered their businesses to have either a good or fully future-proofed strategy for dealing with indirect tax, suggesting that they choose to accept a certain level of risk.
Peter Boerhof, senior director of VAT for Vertex’s chief tax office, commented: ‘It is intriguing why so many businesses seem to have accepted a certain level of risk when it comes to indirect tax compliance. Principally, the survival or commercial expansion of the business may be its top priority ahead of its indirect tax compliance strategy. The business may also have a high-risk tolerance and take the materiality view, believing that the worst outcome is fines and penalties while lacking the resources to tackle compliance at present.’
Interestingly, 60% of respondents agreed that common global tax standards for digital/online sales and greater digitalisation of government tax return and payment systems for indirect taxes would enhance compliance.
New research from tax technology company Vertex suggests that up to 75% of global businesses accept a certain level of tax compliance risk in relation to indirect taxes.
The survey, Compliance’s complexity: Attitudes and barriers to getting it right in indirect tax, of 580 indirect tax decision makers from global companies with annual revenue of at least $50m, revealed that three quarters were accepting indirect tax compliance risk, with 84% of respondents saying they felt ‘personally exposed’ by the level of compliance within their business. The data also highlights differences across regions. 90% of US-based respondents considered their businesses to be risk prone compared to 56% of those based in France, Italy or Spain. Businesses in the UK and Ireland fell in the middle, at 72%.
One the challenges for businesses (and, it seems, for tax authorities) is the cost of indirect tax compliance, with respondents estimating that, on average, compliance with regulation costs around 20% of their business’s revenue.
Perhaps more surprisingly, given the perception of non-compliance risk, over 70% of respondents considered their businesses to have either a good or fully future-proofed strategy for dealing with indirect tax, suggesting that they choose to accept a certain level of risk.
Peter Boerhof, senior director of VAT for Vertex’s chief tax office, commented: ‘It is intriguing why so many businesses seem to have accepted a certain level of risk when it comes to indirect tax compliance. Principally, the survival or commercial expansion of the business may be its top priority ahead of its indirect tax compliance strategy. The business may also have a high-risk tolerance and take the materiality view, believing that the worst outcome is fines and penalties while lacking the resources to tackle compliance at present.’
Interestingly, 60% of respondents agreed that common global tax standards for digital/online sales and greater digitalisation of government tax return and payment systems for indirect taxes would enhance compliance.
