Managing indirect taxes in rapid-growth markets. Executive summary

Transcription

1 Managing indirect taxes in rapid-growth markets Executive summary

2 Introduction Welcome to the executive summary of Managing indirect taxes in rapid-growth markets sketch 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 fulllength study at ey.com/rapidgrowth. Figure 1. EY s 25 rapid-growth markets Mexico Colombia 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 side, there are customs duties, excise taxes and taxes on Chile ey.com/rapidgrowth

3 Russia Czech Republic Qatar Saudi India China South Korea Ghana Malaysia Indonesia Brazil Contents 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 4 Trading with rapid-growth markets 4 Investing in rapid-growth markets 5 Operating in rapid-growth markets 7 Effective management 9 Seizing opportunities avoiding pitfalls 9 Contacts 11

4 Part I As the balance of world trade shifts to RGMs, the nature of taxation also shifts Trade 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

5 Five global indirect tax trends: how do they play out in the RGMs? 1 VAT and GST rates are increasing 2 Excise duties are on the rise again 3 Free trade reduces customs but confronts protectionism Tax administrations are focusing on compliance and enforcement Managing indirect taxes in rapid-growth markets Executive summary 3

6 Part II Indirect tax issues and opportunities in rapid-growth markets Trading with rapid-growth markets To the point: Managing the impact of customs duties on trade Levied 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 4 Managing indirect taxes in rapid-growth markets Executive summary

7 Taxes on consumption increase costs due to: apply this type of consumption tax at the national, federal and Multiple import taxes time of importation and eventual recovery countries, and complex supply chains are not accommodated by Free trade zones create indirect tax opportunities formalistic approaches to enforcement and, more broadly, the processes, standardized procedures and the use of appropriate Investing in rapid-growth markets To the point: Tax and business incentives help companies decide where to invest Managing indirect taxes in rapid-growth markets Executive summary 5

8 VAT director responsible for Europe, Middle East and Africa 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 6 Managing indirect taxes in rapid-growth markets Executive summary

9 sales made, but they are required to account for the tax, and at Effective planning is essential Operating in RGMs To the point: Figure 2. Risk of VAT/GST penalties in 46 countries surveyed 9% Increased 26% Decreased 65% Stayed the same issues in RGMs Corporate tax executives in our survey of RGM operations Complexity and rapid legislative change in RGMs Withholding and recovery rules are more challenging Managing indirect taxes in rapid-growth markets Executive summary 7

10 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 8 Managing indirect taxes in rapid-growth markets Executive summary

11 Part III Effective management: seizing opportunities and avoiding pitfalls To the point: control and detailed local requirements to meet their multiple include: of indirect taxes and incentives to avoid unnecessary costs and Managing indirect taxes in rapid-growth markets Executive summary 9

12 VAT director responsible for Africa and the Middle East 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 Involve incentives specialists: potential pitfalls in the incentives Create partnerships and start the journey 10 Managing indirect taxes in rapid-growth markets Executive summary

13 Contacts Leaders Global Compliance Incentives Global Director Indirect Tax Philip Robinson Americas Jeffrey N. Saviano Jean-Hugues Chabot Robert Smith Europe, Middle East, India and Africa (EMEIA) Gijsbert Bulk Geert Vandenplas Robin Maxwell Jackie Hubbard Aaron Bromley Gino Dossche Karen Hensley-Chelstowska Robin Parsons Christine Oates Sonja Vancrayenest Customs and International Trade William M. Methenitis Neil Byrne Managing indirect taxes in rapid-growth markets Executive summary 11

14 Country VAT contact 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 12 Managing indirect taxes in rapid-growth markets Executive summary

15 Country Customs contact 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 Managing indirect taxes in rapid-growth markets Executive summary 13

16 EY About EY About EY s Tax services ED None