The indirect tax world is in constant motion. What was true yesterday or even today may prove to be wrong tomorrow. Ignoring recent developments in indirect taxes or not being compliant with indirect tax obligations will become an expensive oversight for companies of all sizes, whether they are active in the local market or on a global level.
Only those who pinpoint which changes are most relevant to their business and where to take action can prepare effectively.
These among others were the views of tax experts at EY in a report titled “Indirect tax developments in 2015,” where they identified four trends that shape the global indirect tax landscape.
First in the trend is that indirect taxes continue to grow while direct taxes stagnate.
Whether the need is to finance targeted stimulation programmes for a local economy, or whether it is to generally make up for the gaps left behind by a shrinking economy, indirect taxes have proven to be the first choice for generating revenue for governments in many countries.
Second in the trend is that indirect taxes are adapting to new economic realities. Indirect taxes are strongly intertwined with the economy given the fact that an object taxed is an economic transaction, such as the sale of a good or the provision of a service. If the nature of these transactions or the way that such transactions are handled change, this immediately has a strong impact on indirect taxation.
Furthermore, the trends show that the global trade landscape is changing fast.
While governments are counting on exports for growth, they are at the same time restricting imports. “On the positive side, it should be mentioned that countries are negotiating measures to facilitate trade,” EY tax experts noted, saying that, in constant search for revenue, jurisdictions have started to increasingly focus on the customs tax base.
Last in the trends is that tax authorities are focusing on enforcement of indirect taxes.
Tax audits are changing. Tax and customs inspectors are increasingly using modern technological tools to access real-time comparative figures and data when auditing businesses. They are sharing more information, and tax administrations around the world are implementing electronic auditing of businesses’ financial records and systems.
Iheanyi Nwachukwu
