The tax function in today’s multinational businesses must accommodate nearly constant changes that affect VAT/GST determination – not just the ongoing regulatory changes, but business changes including geographic expansion, mergers & acquisitions, new business units, new ERP systems, new sales channels like e-commerce, new procurement platforms, and new product offerings with complex taxability.
The manual process of tax research and updating every transactional finance system can be a significant cause of VAT/GST error, and a strain on in-house tax and IT resources. Even when the ERP and other financial systems are updated with the latest VAT/GST changes, the native tax functionality in these systems often doesn’t meet the VAT/GST determination needs of a complex multinational organisation, leaving them exposed at audit time.
Many successful multinationals have found that integrating a 3rd party tax engine to their ERP and transactional finance systems significantly improves VAT/GST accuracy and overall tax department agility. A tax engine determines VAT/GST on every sales or purchase transaction in real time as it’s processed. The latest VAT/GST rules, rates, and taxability logic are maintained in the tax engine, outside the ERP or other financial system. This centralises global VAT/GST management within a single system which can be integrated to every transactional finance system across the enterprise. The discussion below lays out 7 reasons for adding a tax engine to manage VAT/GST determination.