How do businesses prepare for the seismic changes ahead?

Latest announcements of the tripling of the VAT rate in Saudi Arabia, the extension of Indonesia’s VAT base to include electronic system purchases, and news of the muted possibility of Australia’s GST reform suggest that indirect tax plates are moving to help economic recovery.

Indirect Tax Reform began

On 11 May 2020, the General Authority of Zakat and Tax in Saudi Arabia announced that VAT would rise from 5% to 15% as of 1 July 2020. Just two years ago, Saudi Arabia launched VAT to relieve its dependence on crude oil bounties, ahead of the unexpected fall in oil prices and the COVID-19 pandemic that caused this massive increase.

The shock deficit blow-out accountants in Melbourne Australia after the $320 billion stimulus splurge leaves Federal Treasurer Josh Freedenberg rules out a rise in the GST rate, saying that “we have no plans to increase the GST” on ABC breakfast radio. However, no proposals for possibly expanding the GST base have been announced yet.

In April, Governor of the Reserve Bank Phillip Lowe said, “We should look again at the way we tax revenue generation, consumption, and land in this country.”

Leading tax expert Professor Robert Deutsch expressed his idea in an interview with Thomson Reuters to increase the GST base, not the cost, to cover raw food, health, and education, with a permanent coverage plan for those who will be affected by the policy.

What is the actual and future effect of the indirect-tax shift?

Tax policy is usually a long process, often faced with contrasting viewpoints and methods. However, as can already be seen, for example, in Saudi Arabia’s rapid rise in the VAT rate as of 1 July 2020, COVID-19 tends to spark the tax reform process. The pace is significantly improved, but the industry is projected to be implemented in less than two months.

There are several consequences on corporations from this rise. E.g., a GST/VAT rate shift is not done by merely ‘flicking a switch’ for enterprises. From a device viewpoint, it takes lengthy implementation. However, with the correct technologies in place, adjustments such as these may be easy and smooth for the organization.

How will technology support organizations with the possible improvements that are coming?

NM: Technology will help corporations keep on top of the global indirect tax law adjustments we plan to see, whether they be dramatic rate changes, which is the case for Saudi Arabia, or changes in the GST base, as is the case with Indonesia and probably Australia.

The software would also help how these changes are converted into the GST/VAT return of an organization that takes all policy changes and regulatory changes into account.

What adjustments would the Tax Authorities expect?

It seems likely that tax authorities will seek to raise their indirect tax collections after a pandemic by tightening corporations’ enforcement, probably by digital requirements. This has also been accomplished in the UK, allowing AP/AR transactions to be sent online to the Tax Authority.

Getting the relevant technologies in place would give corporations the confidence that:

l The GST/VAT treatment applied to the Tax Accountant in Melbourne for the AP/AR transactions is correct.

l As a result of inaccurate reporting or late filing of GST/VAT returns, companies are not subject to any future fines or interest.

l In the indirect tax reporting process, the new legislative and regulatory developments are expressed.

Conclusion

Although working in the technology room is an exciting time, it is clear that there is already a lot of work to be done in 2020., it would be critical for organizations to be able to predict better the change that is coming. Prepare yourself, or you risk being left behind.

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