Managing indirect taxes in rapid-growth markets ...€¦ · Introduction Since 2008, many developed...
Transcript of Managing indirect taxes in rapid-growth markets ...€¦ · Introduction Since 2008, many developed...
Managing indirect taxes in rapid-growth marketsExecutive summary
Introduction
Since 2008, many developed economies
Multinational businesses have responded
featured in this report currently account
have selected them based on three criteria:
• potential
• Size of the economy and population
•
transformation of their business models as
ey.com/rapidgrowth
Mexico
Colombia
Chile
Figure 1. EY’s 25 rapid-growth marketsWelcome to the executive summary of Managing indirect taxes in rapid-growth marketssketch the issues and opportunities that multinational companies face in emerging markets, or as we refer to them here, RGMs. By interviewing clients, investment agencies and the EY Indirect Tax professionals who live and work in RGMs, we are able to highlight the everyday challenges that businesses are tackling. We explain here what lessons they have learned and the “leading practices” they have developed. To read the fascinating case studies and commentary from the tax professionals we interviewed, please consult the full-length study at ey.com/rapidgrowth.
side, there are customs duties, excise taxes and taxes on
Brazil
Ghana
Qatar
Czech Republic
Russia
China
India
South Korea
Malaysia
Indonesia
Saudi
As the balance of world trade shifts to RGMs, the nature of taxation also shifts 2
Five global indirect tax trends: how do they play out in the RGMs? 3
Indirect tax issues and opportunities in rapid-growth markets 4Trading with rapid-growth markets 4Investing in rapid-growth markets 5Operating in rapid-growth markets 7
Effective management 9
Seizing opportunities — avoiding pitfalls 9
Contacts 11
Contents
Part IAs the balance of world trade shifts to RGMs, the nature of taxation also shiftsTrade in all directions
Indirect taxes on the rise
consumption taxes to more comprehensive
in the enforcement landscape is due to a
do deploy modern computer systems to store vast amounts of taxpayer data and
business outcomes, speed up deliveries
2 Managing indirect taxes in rapid-growth markets Executive summary
Five global indirect tax trends: how do they play out in the RGMs?
VAT and GST rates are increasing
Excise duties are on the rise again
Free trade reduces customs but confronts protectionism
Tax administrations are focusing on compliance and enforcement
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3Managing indirect taxes in rapid-growth markets Executive summary
Part IIIndirect tax issues and opportunities in rapid-growth markets
To the point:•
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Trading with rapid-growth markets
Managing the impact of customs duties on tradeLevied to raise revenue or protect domestic
payable can often be used as the taxable
Corporate executives and EY professionals
importer of record; the pros and cons of
Some RGMs offer exemptions in free trade
enforced, and the trend is that compliance
companies should strive for transparency
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Taxes on consumption
increase costs due to:
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apply this type of consumption tax at the national, federal and
• Multiple import taxes
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• time of importation and eventual recovery
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countries, and complex supply chains are not accommodated by
Investing in rapid-growth markets
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Free trade zones create indirect tax opportunities
formalistic approaches to enforcement and, more broadly, the
processes, standardized procedures and the use of appropriate
Tax and business incentives help companies decide where to invest
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Statutory incentives, usually in the form of direct and indirect tax reductions, are available to all companies that satisfy criteria
Given the diversity and availability of incentives, therefore, many companies that invest in RGMs have a chance to improve their
Trends in incentives
Moving up the value chain
Companies can qualify for tax exemptions up to 100% for 10
enforcement, the Chinese authorities have announced the creation
A regional boost
Incentives aren’t gifts
Becoming a registered taxpayer of VAT or GST
VAT director responsible for Europe, Middle East and Africa
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Operating in RGMs
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sales made, but they are required to account for the tax, and at
Effective planning is essential
issues in RGMsCorporate tax executives in our survey of RGM operations
Complexity and rapid legislative change in RGMs
Withholding and recovery rules are more challenging
26%
9% 65%
Decreased Stayed the sameIncreased
Figure 2. Risk of VAT/GST penalties in 46 countries surveyed
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Multinational compliance
Companies need a more systematic approach to customs and international trade
Customs and transfer pricing
to produce a product, many subsidiaries of one company trade
The arm’s length principle: good in theory, tricky in practice
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Part IIIEffective management: seizing opportunities and avoiding pitfalls
To the point:•
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•control and detailed local requirements to meet their multiple
•include:
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of indirect taxes and incentives to avoid unnecessary costs and
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Managing VAT/GST and customs
• Identify and quantify risks and opportunities in cross-border indirect taxation.
• Adopt effective controls and be alert to change in the market. Companies need standardized procedures and internal controls
• Designate management responsibilities and communicate across the organization.executive has the ability to reach into many corporate
• Get involved at the planning stage.
• Maximize internal and external resources.
• Use local knowledge. Some RGMs are so idiosyncratic in their
• Use technology.
Managing grants and incentives
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• Involve incentives specialists: potential pitfalls in the incentives
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Create partnerships and start the journey
VAT director responsible for Africa and the Middle East
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ContactsLeaders
Global Director — Indirect Tax
Philip Robinson
Americas
Jeffrey N. Saviano
Jean-Hugues Chabot
Robert Smith
Europe, Middle East, India and Africa (EMEIA)
Gijsbert Bulk
Customs and International Trade
William M. Methenitis
Neil Byrne
Global Compliance
Geert Vandenplas
Robin Maxwell
Jackie Hubbard
Aaron Bromley
Gino Dossche
Incentives
Karen Hensley-Chelstowska
Robin Parsons
Christine Oates
Sonja Vancrayenest
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Country VAT contact Email Telephone
Argentina Gustavo Scravaglieri
Brazil Jefferson Sanches
Chile Alicia Dominguez
China and Hong Kong Robert Smith
Colombia Aleksan Oundjian
Czech Republic Jan Capek
Stanislav Kryl
Egypt Sherif Al-Kilany
Ghana Wilfred Okine
India Harishanker Subramaniam
Indonesia Iman Santoso
Kazakhstan Zhanna Tamenova
South Korea Kyung Tae Ko
Scott Fife
Malaysia Aaron Bromley
Mexico Jose Olmedo
Nigeria Abasss Adeniji
Poland Dorota Pokrop
Radoslaw Szczech
Qatar Garrett Grennan
Russia Victor Borodin
Vitaly Yanovskiy
Saudi Arabia Garrett Grennan
South Africa Leon Oosthuizen
Thailand William Chea
Turkey Sedat Tasdemir
Cansu Yagci
Ukraine Vladimir Kotenko
United Arab Emirates Garrett Grennan
Vietnam Huong Vu
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Country Customs contact Email Telephone
Argentina Sergio Stepanenko
Brazil Frank de Meijer
Chile Alicia Dominguez
China and Hong Kong Robert Smith
Colombia Gustavo Lorenzo
Czech Republic Stanislav Kryl
Egypt Sherif El-Kilany
Ghana Issac Sarpong
India Harishanker Subramaniam
Indonesia Ary Sutoto
Kazakhstan Zhanna Tamenova
South Korea Scott Fife
Malaysia Siok Kiat Koh
Mexico Rocio Mejia
Nigeria Abasss Adeniji
Poland Radoslaw Szczech
Qatar Garrett Grennan
Russia Yuriy Volkov
Saudi Arabia Garrett Grennan
South Africa Kayn Woolmer
Thailand William Chea
Turkey Sercan Bahadir
Ukraine Eduard Zlydennyy
United Arab Emirates Garrett Grennan
13Managing indirect taxes in rapid-growth markets Executive summary
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