KPMG GLOBAL INDIRECT TAX SERVICESThe 2013 BenchmarkSurvey onVAT/GSTkpmg.com/indirecttaxKPMG INTERNATIONAL
2 | The 2013 Benchmark Survey on VAT/GSTAbout our coverA Benchmark:Victoria Falls is a waterfall insouthern Africa on the ...
The 2013 Benchmark Survey on VAT/GST  | 3Table of ContentsAbout the 2013 Benchmark Survey on VAT/GST 5Executive summary 6K...
4 | The 2013 Benchmark Survey on VAT/GST© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Memb...
The 2013 Benchmark Survey on VAT/GST  | 5About the 2013 Benchmark Survey onVAT/GSTOver the last two decades, KPMG’s Global...
6 | The 2013 Benchmark Survey on VAT/GSTExecutive summaryMany economies around the world continue to struggle with growth ...
The 2013 Benchmark Survey on VAT/GST  | 7Key VAT/GST metrics58 percent sayVAT/GST has anegative cash impacton their busine...
8 | The 2013 Benchmark Survey on VAT/GSTWhich are the top threemetrics used by the CFOto measure the overalleffectiveness ...
The 2013 Benchmark Survey on VAT/GST  | 9Are there specific metricsagreed upon between theHead ofTax and the Headof VAT/GS...
10 | The 2013 Benchmark Survey on VAT/GST2013 Overall 2013 Turnover above USD20bnSource: KPMG International, 2013.Figure 4...
The 2013 Benchmark Survey on VAT/GST  | 11Structure and organization 64 percent ofrespondents do nothave a Global Head ofV...
12 | The 2013 Benchmark Survey on VAT/GSTYes No Do not know2013 Overall 2013 Turnover above USD20bn40%59%1%27%0%72%Source:...
The 2013 Benchmark Survey on VAT/GST  | 1321 percent ofrespondents do not haveany full-time VAT/GSTspecialists – more than...
14 | The 2013 Benchmark Survey on VAT/GSTFigure 8: Given the relative significance and risks of VAT/GST as compared with co...
The 2013 Benchmark Survey on VAT/GST  | 15In which regions are yourVAT/GST specialists located?The number ofVAT/GST specia...
16 | The 2013 Benchmark Survey on VAT/GSTTime allocated to taskscovered by dedicated VAT/GST resourcesRespondents say that...
The 2013 Benchmark Survey on VAT/GST  | 17Accountability for VAT/GST inthe businessThe tax departmentis accountable forVAT...
18 | The 2013 Benchmark Survey on VAT/GSTOnly 1 in 8 businesseshave a Global Headof VAT/GST that hasvisibility over VAT/GS...
The 2013 Benchmark Survey on VAT/GST  | 19VAT/GST policy design &implementationOutside of EMA,more than 50 percentof respo...
20 | The 2013 Benchmark Survey on VAT/GSTSource: KPMG International, 2013.Figure 13 continued: Have you identified the key ...
The 2013 Benchmark Survey on VAT/GST  | 21For those regions thatyou have identified the keyVAT/GST risks, do you haveproce...
22 | The 2013 Benchmark Survey on VAT/GSTHow do you ensure thatthese processes and controlsare embedded in theunderlying b...
The 2013 Benchmark Survey on VAT/GST  | 23Overall, how effective doyou think the processesand controls have been atidentif...
24 | The 2013 Benchmark Survey on VAT/GSTVAT/GST reportingWhere are most of the VAT/GST returns prepared in yourbusiness?O...
The 2013 Benchmark Survey on VAT/GST  | 25In house on a local, country-by-country basisIn house but in a central location ...
26 | The 2013 Benchmark Survey on VAT/GSTTechnology and the futureSurvey respondents were also askedabout the future and s...
The 2013 Benchmark Survey on VAT/GST  | 27FunctionalityinthenativeERP systemisseenasthemostimportantcomponentoftechnology,...
28 | The 2013 Benchmark Survey on VAT/GSTIn terms of future investment in VAT/GST management, 47 percent (up from 39 perce...
The 2013 Benchmark Survey on VAT/GST  | 29If you would like to discuss the results of this survey orany other indirect tax...
30 | The 2013 Benchmark Survey on VAT/GST© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Mem...
© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independ...
kpmg.com/socialmediaThe information contained herein is of a general nature and is not intended to address the circumstanc...
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Benchmark Survey VAT 2013

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Encuesta de Benchmarking 2013 sobre IVA que analiza los impuestos indirectos o impuestos que gravan el consumo, tales como el Impuesto al Valor Agregado (IVA) o el llamado Goods and Services Tax (GST).

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Benchmark Survey VAT 2013

  1. 1. KPMG GLOBAL INDIRECT TAX SERVICESThe 2013 BenchmarkSurvey onVAT/GSTkpmg.com/indirecttaxKPMG INTERNATIONAL
  2. 2. 2 | The 2013 Benchmark Survey on VAT/GSTAbout our coverA Benchmark:Victoria Falls is a waterfall insouthern Africa on the Zambezi River at theborder of Zambia and Zimbabwe.This image isa side view through Batoka Gorge.The falls areclaimed to be the largest in the world.This claimis based on a width of 1,708 meters (5,604 ft)and height of 108 meters (354 ft), forming thelargest sheet of falling water in the world.© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  3. 3. The 2013 Benchmark Survey on VAT/GST  | 3Table of ContentsAbout the 2013 Benchmark Survey on VAT/GST 5Executive summary 6Key VAT/GST metrics 7Structure and organization 11Accountability for VAT/GST in the business 17VAT/GST policy design & implementation 19VAT/GST reporting 24Technology and the future 26Find out more 29© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  4. 4. 4 | The 2013 Benchmark Survey on VAT/GST© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  5. 5. The 2013 Benchmark Survey on VAT/GST  | 5About the 2013 Benchmark Survey onVAT/GSTOver the last two decades, KPMG’s Global IndirectTaxServices practice has seen a significant increase in thenumber of countries and jurisdictions using indirect tax tofund government. According to the Organisation for EconomicCooperation and Development (OECD),Value AddedTaxand Goods and ServicesTax (VAT/GST) are now imposed inover 150 countries, including 33 out of 34 OECD membercountries.The US is the lone exemption but even it hassubnational indirect consumption taxes at average rates ofapproximately 8.6 percent. And whileVAT/GST is a relativelynew taxation method, they are clearly the way of the future.The OECD observes that consumption taxes now accountfor 31 percent of all revenue collected by governments ofOECD member countries and 20 percent of taxation revenuesworldwide.VAT/GST is now one of the most importantsources of revenue for governments, second to socialsecurity contributions and personal income taxes, and wellahead of corporate income taxes, specific consumption taxesand property taxes as a source of revenue.As the world’s governments seek new ways to generaterevenues,VAT/GST rates will increase, more jurisdictionswill adopt them and the scope of many already in place willbroaden. In this decade, KPMG’s Global IndirectTax Servicespractice expects indirect tax reforms to continue to developin China, India and countries in the Middle East. In somecountries, such as China, there are already extremely shortindirect tax reform timeframes under which businessesare expected to adapt their systems and achieve propercompliance.As the global shift toward indirect taxation continues,businesses will encounter more challenges in achieving fullcompliance and more pressure on their resources and cashflow. It is critical for businesses to objectively assess howefficient and effective they are at managing what is rapidlybecoming one of the most important and riskiest of globaltax obligations.Sounds sensible, doesn’t it?That’s where KPMG’s BenchmarkSurvey onVAT/GST (the survey) comes in. KPMG’s GlobalIndirectTax Services practice is delighted to release the2013 edition, offering insights into emerging best practices,benchmarks and geographic or other variances.KPMG’s Global IndirectTax Services practice invites you toread the survey and encourages you to reflect on what itmeans for your business by asking yourself the followingquestions:• How is my business managing its VAT/GST obligations now?• How does it compare to the survey results?• What would I like to change?• How can I build the case for change?• How will I be able to measure the ’value-add’? Profile of respondents• There are 249 respondents from 24 countries.• Thirty-seven percent are responsible for VAT/GST globally, regionally or at the country level. Twenty-one percent are the heads of tax.• Thirty-three percent of respondents have an annual turnover greater than 20 billion (bn) US dollars (USD),hereafter referred to as larger businesses. Eighty percent ofrespondents have annual turnover in excess of USD10bn.• Respondents overall are from a broad range of industries including 12 percent from the banking sector.© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  6. 6. 6 | The 2013 Benchmark Survey on VAT/GSTExecutive summaryMany economies around the world continue to struggle with growth – often sluggishat best. At the same time, there is ever-increasing focus over the tax paid by some of the biggest businesses in the world; a debate that is at times emotionally chargedand tends to overlook the other consumption-based taxes that flow from the goods and services supplied, such asVAT/GST. Further, tax authorities all over the world areshowing much greater interest in evaluating how a business’ tax affairs are governed.For example, current tax authority risk assessment programs in Australia, theNetherlands and the UK explicitly address the strength of a business’ tax governancepolicies. Specifically, in the UK, senior accounting officers of large businesses mustannually certify that their tax systems and controls are adequate.Against this backdrop of continuous challenge – both economically and fiscally – thesurvey shows:• CFO’s continue to view the effectiveness of their tax department throughthe lens of corporate tax with little or no focus on VAT/GST. Eighty-three percent of all respondents still have to establishVAT/GST performance goals that arevisible and meaningful to the CFO. Now with increasing government focus ontaxes calculated on consumption rather than profits, CFOs would be wise to thinkmore objectively about how their businesses are managing this real-time tax.• There is a significant shift towards tax departments taking ownership oraccountability forVAT/GST globally. In 55 percent of all respondents (risingto over 70 percent in the case of larger businesses), the tax department is nowaccountable for VAT/GST. Having a clear understanding of who is accountable for VAT/GST in a business is the starting point for effectiveVAT/GST management.However, having the title without the appropriate infrastructure in terms of people, process and technology could give a false sense of security.• Sixty-four percent of businesses do not have a Global Head ofVAT/GSTand the survey shows there has been no obvious, commensurate increase inheadcount either at a global, regional or local level in the last year. Alarmingly,21 percent of businesses do not have any full-time VAT/GST specialists. • There is greater evidence of quality VAT/GST management in Europe, the Middle East and Africa (EMA). In Asia Pacific (ASPAC) and Latin America (LATAM) businessesshould be concerned about how compliance risks are being managed.This isparticularly important in these regions given the complexity of theirVAT/GST regimes.• Outside of EMA, more than 50 percent of respondents have not identifiedthe keyVAT/GST risks in their business. For those businesses that haveidentified the key risks and have processes and controls in place to managethose risks, 16 to 23 percent of respondents across all regions rate their abilityto manage the risks as poor.• Given the scale of VAT/GST throughput being handled by global businesses, significant opportunities are being missed to manage risk more efficientlyand effectively, improve cash flow and reduce bottom-line cost.• Businesses with effective VAT/GST management are still in the minority. There isa very long way to go before the resources, processes and technology strategiesare embedded and accountabilities set to adequately manage the globalVAT/GSTchallenges. Given the rapid pace of change – expected to continue through 2013and beyond – even the more advanced businesses are simply running to stand still,while others are falling further behind.Two-thirdsofrespondentsinEMAandone-third intherestofthe worldbelievethatVAT/GSTrateswill increaseinthenext 3 years.© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  7. 7. The 2013 Benchmark Survey on VAT/GST  | 7Key VAT/GST metrics58 percent sayVAT/GST has anegative cash impacton their business.Respondents were asked a series ofquestions to build a picture of howVAT/GST affects their business and tounderstand what metrics are in place tomeasure their performance.What is the cash impact ofVAT/GST on your business?This year, 58 percent of allrespondents say that VAT/GST hasa negative cash impact on theirbusiness, up from 51 percent in 2012.Nineteen percent say it has a positiveimpact, down from 23 percent in 2012.This movement is a strong indicator ofthe impact that VAT/GST can have on abusiness’ working capital and impliesthat more are feeling the strain.For many businesses, large or small,VAT/GST is the third largest cash flowitem after sales and cost of sales,but determining the true impact thatVAT/GST has on a business’ cashposition is complex. Often businessesfocus solely on the net VAT/GSTpayment to, or receivable from,the tax authority. But this ignores thesignificant amounts of VAT/GST thatflow in and out of a business daily(e.g. on customer receipts andpayments to suppliers).Cash positive Neutral Cash negative Do not know2013 Overall 2013 Turnover above USD20bn19%22% 20%16%58% 59%4% 4%Source: KPMG International, 2013.Figure 1: What do you believe is the cash impact of VAT/GSTon your business?© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  8. 8. 8 | The 2013 Benchmark Survey on VAT/GSTWhich are the top threemetrics used by the CFOto measure the overalleffectiveness of the taxdepartment?The three most important metricsthat the CFO uses to measure thetax department’s effectiveness havenot changed since 2012 and show nodifference between all respondents andlarger businesses:• the effective tax rate (overall31 percent; larger businesses30 percent)• timely and accurate submission oftax returns (overall 22 percent; largerbusinesses 18 percent)• minimization of interest and penalties(overall 17 percent; larger businesses15 percent).VAT/GST performance goals rank 7th outof 8 in terms of their overall importance;however, larger businesses saw a small,but notable increase since 2012, rankingVAT/GST performance goals 5th out of8 this year (versus 7th out of 8 in 2012).Clearly a lot still needs to be done to getthe importance ofVAT/GST managementon the CFO’s radar.83 percent ofrespondents do nothave specific VAT/GSTperformance goalsvisible to their CFO.2013 Overall 2013 Turnover above USD20bnSource: KPMG International, 2013.Figure 2: Which are the top three metrics in order of importance, used by the CFO to measure the overalleffectiveness of your tax department?31%30%22%18%17%15%8%12%7% 7% 7%6% 6%8%2% 2%0%5%10%15%20%25%30%35%OtherVAT/GSTperformancegoalsCashtax rateRisk adjustedtax savingsRelationshipswith the taxauthoritiesMinimizationof interestand penaltiesTimelyand accurate submissionof tax returnsEffectivetax rate© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  9. 9. The 2013 Benchmark Survey on VAT/GST  | 9Are there specific metricsagreed upon between theHead ofTax and the Headof VAT/GST to measure theeffectiveness of the VAT/GSTteam?Fifty-nine percent of respondentsoverall in 2013 (down from 69 percentin 2012) do not have specificVAT/GSTmetrics agreed upon with their HeadofTax.While the size of business couldindicate maturity in scope and usageof metrics, the survey again finds thatthe even larger businesses do not havespecific metrics in place (51 percent in2013 versus 50 percent in 2012).Yes NoSource: KPMG International, 2013.Figure 3: Are there specific metrics agreed upon between the Headof Tax and the Head of VAT/GST to measure the effectiveness ofthe VAT/GST team?41%59%49%51%2013 Turnover above USD20 bn2013 Overall© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  10. 10. 10 | The 2013 Benchmark Survey on VAT/GST2013 Overall 2013 Turnover above USD20bnSource: KPMG International, 2013.Figure 4: Of the metrics used to measure the effectiveness of the VAT/GST team, which are the top threein order of importance?0%5%10%15%20%25%30%35%OtherReduction inexternal adviserspendReduction inVAT/GST payableon incomeRelationshipwith the taxauthorityAwarenessof VAT/GST inthe businessVAT/GSTcash flowReduction inVAT/GST cost onexpenditureMinimizationof interest andpenaltiesTimely andaccurate submissionof VAT/GST returns31%22%16% 17%11%19%11%12%11%10%7%9%5%7%3%1%4% 3%What are the top threemetrics used by the Head ofTax to measure the overalleffectiveness of the VAT/GSTteam?The three most important metrics for allrespondents are:• timely and accurate submission ofVAT/GST returns (31 percent)• minimization of interest and penalties(16 percent)• equal response forVAT/GST cashflow, awareness ofVAT/GST in thebusiness and the reduction inVAT/GST cost on expenditure (11 percent).In 2012,VAT/GST cash flow andreduction inVAT/GST cost onexpenditure were second and thirdrespectively. In 2013, larger businesseshave a higher number interested inthe reduction ofVAT/GST cost onexpenditure.All metrics identified this year and last,show a clear preference from the CFOto the Head ofTax to get the basicsright – compliance and cost/penaltyminimization. However, with tax ingeneral, andVAT/GST becoming morecomplex, businesses of all sizes will bechallenged to ensure they are preparedto add value to the overall businessthrough cash flow analysis and planning,together with cost reduction.© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  11. 11. The 2013 Benchmark Survey on VAT/GST  | 11Structure and organization 64 percent ofrespondents do nothave a Global Head ofVAT/GST.Global and Regional Headsof VAT/GSTThis year, 34 percent of respondentshave a Global Head of VAT/GST, almostflat from 35 percent in 2012. For thosethat have a Global Head of VAT/GST, 37percent are located in the UK, followedby 17 percent in Germany, 12 percentin the US and 6 percent in Switzerlandand Australia.Figure 5: Do you have a Global Head of VAT/GST (or equivalent title)?Yes No Do not know2013 Overall 2013 Turnover above USD20bn34%2%64% 45%49%6%Source: KPMG International, 2013.© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  12. 12. 12 | The 2013 Benchmark Survey on VAT/GSTYes No Do not know2013 Overall 2013 Turnover above USD20bn40%59%1%27%0%72%Source: KPMG International, 2013.Figure 6: Do you have Regional Heads of VAT/GST (or equivalent title)?Do you have Regional Heads of VAT/GST?Twenty-seven percent of respondents have Regional Heads ofVAT/GST.This rises to40 percent for larger businesses.Regional focus appears to be on therise. This is likely a reflection of thesignificant changes in VAT/GST ratesin many countries and associatedchallenges and risks that need to beaddressed.This year, for all respondents whohave a Regional Head ofVAT/GST,85 percent have a regional focus onEMA, 46 percent on North America,40 percent on ASPAC and 32 percentLATAM. Relatively speaking, the largerbusinesses follow a similar patternbut they tend to have higher focus inNorth America (61 percent), ASPAC(45 percent) and LATAM (39 percent).EMA has the same response regardlessof the size of business – representativeof the relative maturity ofVAT/GST asboth a tax and a specialty in this region.© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  13. 13. The 2013 Benchmark Survey on VAT/GST  | 1321 percent ofrespondents do not haveany full-time VAT/GSTspecialists – more than50 percent have lessthan 10 worldwide.0 1-10 11-20 21-30 31-40 41+ Do not know2013 Overall 2013 Turnover above USD20bn21%8%55% 54%18%2%6%2%6%0% 0%10%15%1%Source: KPMG International, 2013.Figure 7: How many full-time equivalent VAT/GST specialists do you have in your business globally?Global VAT/GST resourcesThe number of full-time equivalentemployees focused onVAT/GST hasnot changed materially since 2012.Thisyear, 21 percent of overall respondents(versus 26 percent in 2012) reporthaving zero full-time equivalentVAT/GST specialists; 6 percent of the largerbusinesses have in excess of 41 full-time equivalents. A small, but notable,10 percent of all respondents do notknow how many full-time equivalentsthey have, rising (surprisingly) to15 percent for the larger businesses.The seniority of staff follows the classicpyramid structure with resources moreheavily weighted at the staff level.Thereis no material difference in percentagesplit with the largest businesses.Indeed, the survey found again thisyear, thatVAT/GST is under-resourced allover the world.The exception is NorthAmerica where being appropriatelyresourced comes in above under-resourced – 56 percent versus 44percent respectively (see figure 8,next page).Majority of VAT/GST employees are at the staff level(62 percent); 27 percent management; 12 percent seniormanagement.© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  14. 14. 14 | The 2013 Benchmark Survey on VAT/GSTFigure 8: Given the relative significance and risks of VAT/GST as compared with corporate taxes for yourbusiness, do you feel that the management of VAT/GST in your business globally is under-resourced,appropriately resourced or over-resourced (please indicate by region)?ASPAC EMAASPAC 2013 Turnover abover USD20bnASPAC 2013 Overall ASPAC 2013 Turnover abover USD20bnEMEA 2013 Overall40%60%54%44%54%43%3%2%66%34%0%1%0%10%20%30%40%50%60%70%0%10%20%30%40%50%60%70%Source: KPMG International, 2013.LATAM North AmericaLATAM 2013 Turnover abover USD20bnLATAM 2013 Overall North America 2013 Turnover abover USD20bnNorth America 2013 Overall35%64%44%56%35%65%0%1%61%39%0%1%0%10%20%30%40%50%60%70%0%10%20%30%40%50%60%70%Under-resourced Appropriately resourced Over-resourced© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  15. 15. The 2013 Benchmark Survey on VAT/GST  | 15In which regions are yourVAT/GST specialists located?The number ofVAT/GST specialistslocated in EMA is almost doublethe number in North America andsignificantly more than in ASPAC andLATAM. Larger businesses follow thesame trend.Given the maturity of theVAT/GSTregimes in EMA, and particularly inEurope, the deployment of morespecialized resources in EMA is not atall surprising. Higher averageVAT/GSTrates in Europe compared with otherparts of the world, together with thegeographic footprint of the respondentsmay also be a factor. Only 15 percent ofresources are in ASPAC and 8 percent inLATAM. Given the complex and evolvingnature ofVAT/GST regimes in thoseregions, it can only be expected that thisdelta will close over time.49% 49%2013 Overall 2013 Turnover above USD20bnEMA North AmericaASPAC LATAM8% 8%15% 14%28% 28%Source: KPMG International, 2013.Figure 9: In which region(s) are your VAT/GST specialists located?© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  16. 16. 16 | The 2013 Benchmark Survey on VAT/GSTTime allocated to taskscovered by dedicated VAT/GST resourcesRespondents say that the majority oftheir resources’ time is spent onVAT/GST return preparation, followed byproviding advice to the business andprocess, systems and technology.There was no difference in responsesacross size of business or comparedto last year’s survey. Indeed the surveyindicates that 42 percent of all time isspent on managing compliance (VAT/GSTreturn preparation, process, systemsand technology). Advisory and planningadds to just 34 percent, suggesting thatthe modern in-houseVAT/GST team isincreasingly focused on the practical sideof managing the tax, rather than valuecreation which is consistent with themetrics previously mentioned.2013 Overall 2013 Turnover above USD20bnVAT/GSTreturn preparationVAT/GSTadvisoryProcess, systemsand technologyManagingVAT/GST auditsVAT/GSTplanningOtherInternal VAT/GSTtraining andawareness0%5%10%15%20%25%30%35%9%7%2% 2%11%12%13% 13%14% 14%23%25%28% 28%Note: Total may not sum to 100% due to rounding.Source: KPMG International, 2013.Figure 10: Please estimate the percentage of time allocated to each task undertaken by your VAT/ GST specialists?© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  17. 17. The 2013 Benchmark Survey on VAT/GST  | 17Accountability for VAT/GST inthe businessThe tax departmentis accountable forVAT/GST in 55 percentof respondents, risingto 71 percent forlarger businesses.The survey also exploredVAT/GSTgovernance practices, starting withwho has accountability forVAT/GST.Clarity over this issue is at the very heartof effectiveVAT/GST management.Last year, 51 percent of respondentsnamed the tax department as havingoverall accountability, while 38 percentnamed finance and accounting. Forlarger businesses, tax was accountablein 63 percent of cases and finance andaccounting in 19 percent.This year, the survey showsan increasing trend for the taxdepartment to take ownership oraccountability for VAT/GST. In 55percent of cases (and 71 percent forlarger businesses) the tax departmentnow has ownership. Interestingly,the number of respondents who wereunclear on who had accountabilitydropped to 4 percent (2 percent forlarger businesses).These results show that the taxdepartment is increasingly being seenas the group accountable rather than asa mere service provider to finance andaccounting.This is a reflection of twothings. First, there is growing recognitionthat the complexity ofVAT/GST requiresreal expertise to manage it effectively.And second, the evolution of businessfrom county by country controllershipto centralization and standardization offinance processes.2013 Overall 2013 Turnover above USD20bnTax Finance &AccountingOther (e.g. Legal) Unclear55%71%38%22%3%5% 4% 2%Source: KPMG International, 2013.Figure 11: Who has ultimate accountability for VAT/GST in your business?© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  18. 18. 18 | The 2013 Benchmark Survey on VAT/GSTOnly 1 in 8 businesseshave a Global Headof VAT/GST that hasvisibility over VAT/GSTreturns prepared locally.Visibility of Global Head ofVAT/GSTIn 2012, of those respondents whohad a Global Head of VAT/GST, only26 percent of them had visibilityover VAT/GST returns prepared at alocal/country level. Encouragingly,this year the percentage of GlobalHeads of VAT/GST who have suchvisibility has increased to 35 percentfor all respondents, including largerbusinesses.Given the movements in visibility thisyear, it is assumed that businesses areinvesting in technology and other similarresources to allow for proper oversightand coordination.Yet, with the ever-changing complexities ofVAT/GST, thepercentages are still low. Indeed, giventhat only 34 percent of respondentshave a Global Head ofVAT/GST, of whichonly 35 percent of those have visibilityoverVAT/GST returns prepared.Thissuggests that there is still a long wayto go to achieve effectiveVAT/GSTmanagement.35% 35%65% 65%2013 Overall 2013 Turnover above USD20bnYes NoSource: KPMG International, 2013.Figure 12: Does the Global Head of VAT/GST (or equivalent title)have visibility over VAT/GST returns prepared locally?© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  19. 19. The 2013 Benchmark Survey on VAT/GST  | 19VAT/GST policy design &implementationOutside of EMA,more than 50 percentof respondents havenot identified the keyVAT/GST risks in theirbusiness.Have you identified the keyVAT/GST risks in ASPAC,EMA, LATAM and NorthAmerica?Identifying the keyVAT/GST risks acrossthe “order to cash, purchase to pay andrecord to report” process is essentialto effectiveVAT/GST tax management.In ASPAC, LATAM and North America,an alarming number of respondents saythey have not identified the risks or theysimply do not know if they have done so.EMA is the exception with the majority ofrespondents saying they have identifiedthe risks. Given the relative complexityof theVAT/GST regime outside EMA, thisis a cause for concern. For those whohave not identified keyVAT/GST risks, thereasons for not doing so relate to a lackof visibility and resources to do so, or nomandate from management.Source: KPMG International, 2013.Figure 13: Have you identified the key VAT/GST risks in the following regions?ASPAC60%48%12%22%28%30%EMA70% 68%8%12%24%18%0%10%20%30%40%50%60%70%80%0%10%20%30%40%50%60%70%80%2013 Overall regional responses 2013 Turnover above USD20bnDo not knowNoYesDo not knowNoYesSee next page for other regions© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  20. 20. 20 | The 2013 Benchmark Survey on VAT/GSTSource: KPMG International, 2013.Figure 13 continued: Have you identified the key VAT/ GST risks in the following regions?LATAM44%33%9%27%47%40%0%10%20%30%40%50%60%70%North America44%52%8%22%40%34%0%10%20%30%40%50%60%70%2013 Overall regional responses 2013 Turnover above USD20bnDo not knowNoYesDo not knowNoYes© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  21. 21. The 2013 Benchmark Survey on VAT/GST  | 21For those regions thatyou have identified the keyVAT/GST risks, do you haveprocess and controls in placeto manage those risks?For those respondents who haveidentified regionalVAT/GST risks, anencouragingly high majority say theyhave correlating processes and controlsin place.The results are similar for allrespondents and larger businesses.However, it should be noted that with theexception of EMA, more than 50 percentof respondents had not identified the keyVAT/GST risks in the first place.Do not knowNoYesDo not knowNoYesASPAC70%72%15%17%15%10%0%10%20%30%40%50%60%70%80%90%0%10%20%30%40%50%60%70%80%90%EMA79%84%12%17%4%5%Figure 14: For those regions that you have identified the key VAT/GST risks, do you have process and controlsin place to manage those risks?Do not knowNoYesSource: KPMG International, 2013.Do not knowNoYes71%60%17%26%13%15%0%10%20%30%40%50%60%70%80%90%0%10%20%30%40%50%60%70%80%90%68%81%9%22%9%10%LATAM North America2013 Overall regional responses 2013 Turnover above USD20bn© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  22. 22. 22 | The 2013 Benchmark Survey on VAT/GSTHow do you ensure thatthese processes and controlsare embedded in theunderlying business process?When reviewing how businessesensure processes and controls areembedded within the underlyingbusiness process, the most popularmethod was some form of internalcontrol self-assessment (76 percent)followed by audit by the tax department(46 percent) and audit by internalaudit (40 percent). Larger businessesreport more reliance on internal auditthan audit by the tax department (66percent versus 58 percent respectively),suggesting that larger businesses arepotentially more effective in securinginternal audit support.The responses are consistent with the“three lines of defense approach” torisk management. In this approach,risk is best managed at the first line ofdefense by the process owners, guidedby clear policies and subject to reviewby the tax department as subject matterexperts (the second line) and followedby internal or external audit to provideindependent assurance (the third line).Internal control self-assessment Audit by external auditors OtherAudit by tax department Audit by internal auditOverall >USD20bn0%20%40%60%80%Overall >USD20bn Overall >USD20bn Overall >USD20bn Overall >USD20bnSource: KPMG International, 2013.Figure 15: Overall, how do you ensure that these processes and controls are embedded in the underlyingbusiness process?76%80%58%66%8%46%40%8%44%39%Overall Turnover above USD20bn© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  23. 23. The 2013 Benchmark Survey on VAT/GST  | 23Overall, how effective doyou think the processesand controls have been atidentifying and mitigatingVAT/GST risk in yourbusiness?For businesses that have processesand controls in place regionally, EMAshows 38 percent of respondentsranking their effectiveness as verygood or excellent.This comparesto North America with 33 percent,Asia Pacific with 27 percent andLATAM with 19 percent. However,16-23 percent of respondents acrossall regions rated them as poor.Furthermore, more than 50 percent ofrespondents outside EMA have notidentified the key VAT/GST risks in thefirst place.Internal control selfassessment is themost popular way ofembedding process andcontrols in the business.4%15%57%23%4%29%51%16%3%24%56%16%EMA LATAM North America5%33%45%17%0%20%40%60%ASPACSource: KPMG International, 2013.Figure 16: Overall, how effective do you think the processes and controls have been at identifying and mitigatingVAT/GST risks in your business?Excellent Very good Good PoorOnly 19 percent of respondents in LATAM rate the processes and controls they have inplace to manage risks as either very good or excellent.© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  24. 24. 24 | The 2013 Benchmark Survey on VAT/GSTVAT/GST reportingWhere are most of the VAT/GST returns prepared in yourbusiness?Overall, respondents prepare theirVAT/GST returns in-house, on a localcountry-by-country basis. Indeed thismethod is more than twice as commonas in-house centralization or outsourcing(be it at a local or regional level). In EMAthere is a trend towards centralizationover outsourcing, whereas in otherregions the delta between the two ismuch closer, with outsourcing beingmore popular than centralization inLATAM. For larger businesses thetendency to centralize is higher in EMAthan elsewhere.Often the trigger point for a business toassess itsVAT/GST compliance strategyis a finance function transformationwhere the organization as a wholelooks to assess what functions tocentralize and which to outsource. It isessential thatVAT/GST considerationsare properly considered at that time.With centralization, technology nowexists that allows automation of oftencomplex manual processes. But, evenwith technology, resource demandsremain high alongside the need to keepcurrent with local filing requirementsaround the world. By contrast, withoutsourcing, that entire obligation shiftsonto the service provider who hasthe ability to invest in technology andautomation to a much greater extentthan many individual businesses areable to do on their own. But outsourcingrequires a real sense of partnershipbetween the business and the serviceprovider -- the obligation for which oftenfalls upon the tax department.Thepartnership approach ensures not onlythat the compliance process works,and works well, but that the value-add opportunities that can flow fromoutsourcing are fully realized.Most businessesprepare VAT/GSTreturns in-house ona local country-by-country basis.© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  25. 25. The 2013 Benchmark Survey on VAT/GST  | 25In house on a local, country-by-country basisIn house but in a central location covering multiple countriesOutsourced to a local service providerOutsourced to a regional or globalservice providerDo not knowSource: KPMG International, 2013.Figure 17:Where are most of the VAT/ GST returns prepared in your business across the ASPAC, EMA, LATAMand North America regions?EMAASPACLATAMNorth AmericaOverall>USD20bnOverall>USD20bnOverall>USD20bnOverall>USD20bn55% 11% 7% 4% 23%57% 13% 7% 1% 21%48% 24% 6% 11% 12%40% 31% 5% 8% 16%45% 18% 8% 5% 24%51% 14% 9% 3% 23%40% 10% 10% 7% 33%45% 10% 9% 3% 33%© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  26. 26. 26 | The 2013 Benchmark Survey on VAT/GSTTechnology and the futureSurvey respondents were also askedabout the future and specifically torank the importance of various typesof technology that will help themmanage theirVAT/GST affairs todayand in 3 years time. Similar to 2012,respondents this year say, irrespectiveof size, thatVAT/GST functionality withintheir native ERP systems is by far themost important technology solution forthem today and in 3 years. However, itis notable that tax engines have grownin relative importance since last year,with 50 percent of larger businessesHighest 2 3 4 5 LowestSource: KPMG International, 2013.Figure 18: In relation to the role of technology in managing your VAT/GST affairs, please rank the followingin terms of your view of the importance to your business today and your estimate of likely importance in3 years time.69% 19% 6% 5%1%1%64% 18% 10% 5%3%18% 29% 29% 11%13%18% 24% 25% 14%19%5% 30% 26% 14%25%13% 13% 25% 13%25% 13%29% 14% 14% 14%29%6% 17% 19% 32%25%19% 31% 17% 13%19%15% 27% 27% 16%15%6% 16% 25% 31%21%1%1%13% 26% 26% 10%24%VAT/GST functionality within native ERP systems (e.g. SAP, Oracle)VAT/GST knowledge management, eLearning and awareness technologiesTax engine technology to automate the tax determination for salesThird-party VAT/GST return preparation softwareWorkflow technology to give oversight over VAT/GST returns globallyOther2013 OverallToday3 years timeToday3 years timeToday3 years timeToday3 years timeToday3 years timeToday3 years time© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  27. 27. The 2013 Benchmark Survey on VAT/GST  | 27FunctionalityinthenativeERP systemisseenasthemostimportantcomponentoftechnology,althoughtax enginesarebeingseenasincreasinglyimportant.rating them in their top two priorities.In our view, this represents a growingunderstanding and awareness thatERP systems can at times struggle toautomate tax determination for complexand dynamic supply chains, particularlyin an environment where there havebeen an unprecedented number ofindirect tax rule and rate changes.The findings support the view that taxengines allow far greater flexibility andcontrol for the tax department while atthe same time providing real time, ruleand rate updates.20% 20% 20% 40%66% 21% 6% 5%67% 20% 8% 4%14% 24% 30% 17%15%17% 33% 20% 11%19%9% 16% 13% 29%31%7% 23% 31% 20%20%14% 14% 29% 14%29%17% 38% 15% 14%17%8% 23% 33% 21%15%11% 17% 34% 11%26%11% 18% 20% 29%21%Highest 2 3 4 5 LowestSource: KPMG International, 2013.1%1%2%2%2%Figure 18 continued: In relation to the role of technology in managing your VAT/GST affairs, please rank thefollowing in terms of your view of the importance to your business today and your estimate of likely importancein 3 years time.VAT/GST functionality within native ERP systems (e.g. SAP, Oracle)VAT/GST knowledge management, eLearning and awareness technologiesTax engine technology to automate the tax determination for salesThird-party VAT/GST return preparation softwareWorkflow technology to give oversight over VAT/GST returns globallyOtherToday3 years timeToday3 years timeToday3 years timeToday3 years timeToday3 years timeToday3 years time2013 Greater than USD20bn© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  28. 28. 28 | The 2013 Benchmark Survey on VAT/GSTIn terms of future investment in VAT/GST management, 47 percent (up from 39 percentlast year) prioritize investment in process.To manage VAT/GST moreeffectively, do you expectto invest more in the next3 years in process,technology or people?Respondents were also asked wherethey expect to make investments tomanageVAT/GST more effectively.There is a clear preference for processand technology followed by people.For larger businesses process andtechnology investments are clearlyfavored and the investment in peopleis materially less as businesses look totechnology to help them achieve a morepreventative and automated controlenvironment.2013 Overall 2013 Turnover above USD20bn010203040500102030405047%29%25%44%40%16%Process Technology PeopleSource: KPMG International, 2013.Figure 19: To manage VAT/GST more effectively, do you expect to invest more in the next 3 years in?© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  29. 29. The 2013 Benchmark Survey on VAT/GST  | 29If you would like to discuss the results of this survey orany other indirect tax matter, please contact your usualKPMG indirect tax contact or refer to the contacts listed.If you are not an existing KPMG tax client we wouldwelcome the opportunity to discuss what KPMG canoffer to you – please refer to the list of contacts here orvisit www.kpmg.com/indirecttax for a local contact.Findoutmore© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  30. 30. 30 | The 2013 Benchmark Survey on VAT/GST© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  31. 31. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  32. 32. kpmg.com/socialmediaThe information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Althoughwe endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or thatit will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examinationof the particular situation.© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliatedwith KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or anyother member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.Designed by Evalueserve.Publication name:The 2013 Benchmark Survey onVAT/GSTPublication number: 130051Publication date: April 2013

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