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International indirect tax guide 2016

Jarlath O'Keefe Jarlath O'Keefe

Research has shown that there has been a discernible shift by Governments in the focus of taxation from direct to Indirect Taxes. Most Governments believe that Indirect Taxes have less of a negative impact on economic growth than direct taxes and VAT rate increases are viewed as less inflammatory than income tax increases. There is clear evidence to suggest that in the developed tax jurisdictions VAT rates are increasing, excise duties are on the increase and there is a focus on compliance and enforcement by the tax administrators. Ireland is merely following this trend towards Indirect Tax.

Effective management of Indirect Taxes is essential to support growth and reduce costs and risk. This involves identifying and quantifying the Indirect Taxes that a company currently pays and reclaims, identifying and quantifying areas of current and future risk and opportunity, ensuring there are clear responsibilities for managing an organisations Indirect Taxes and ensuring that you involve all parts of the business that have a stake in managing and improving your business performance e.g. tax, finance, operations procurement and the property team.

The challenges for companies to overcome in Ireland in terms of Indirect Taxation can be divided into four areas:

  1. compliance which involves the accurate preparation, review and submission of VAT and other Indirect Tax returns is crucial given the high rates of interest and penalties applied;
  2. the person responsible for Indirect Tax compliance should be central to the changes in the supply chain;
  3. the company must be aware of the effect that changes to Indirect Tax legislation can have on the company; and
  4. the company must actively manage its risk in respect to indirect Tax to reduce the impact of any tax controversy with Irish Revenue.

Grant Thornton’s Indirect Tax team can empower clients by sharing VAT knowledge and expertise. We focus on a client’s tax performance to provide opportunities to improve efficiencies. We advocate a more strategic approach to VAT planning to limit the potential exposure to and the financial risk associated with non- compliance. We try to enhance a client’s VAT performance by making the client aware of best practice within industry sectors. We use the most up to date VAT technology tools to manage and improve VAT processes.

I think that research has shown that the burden of Indirect Taxes is greater than other taxes. While there is an understanding that the EU has a harmonised system of VAT it is clear to both taxpayers and tax advisers that the complexity of VAT should not be under estimated and it is essential that all taxpayers particularly those that operate on a multi-jurisdictional basis periodically review their VAT processes to, if possible, reduce VAT liabilities, improve cash flow and manage VAT compliance costs.

Grant Thornton’s global Indirect Tax team is expert at ensuring the VAT optimisation of the supply chain. We regularly advise on the VAT cash flow management for clients to mitigate risk and provide a competitive advantage.