The road to VAT (indirect tax) automation - The project implementation team

20+ years of experience in VAT automation motivated me in writing the ‘road to VAT automation’.

I tried to formulate it in different topics. This is the fourth one whereby I discuss the composition of the indirect tax team. A solid implementation team can make a huge difference, not only in respect of the quality of the outcome but also in respect of timing and costs. 

My texts are meant to trigger discussion: How did you cope with VAT Automation in your company? What experiences you want to share? What questions you have? 

I will be using the word 'VAT' throughout the entire blog, but it does cover indirect tax systems called GST as well as sales tax.

Off we go again ... let's continue on the road to VAT Automation.

Once you have decided what solution you will implement you will need to compose your implementation team.

I’ve written this post starting from the assumption it is a global implementation exercise. In many cases, it may not be about a global implementation, so from that respect, I would suggest leaving out the ‘global layer’, so you can simply apply the entire process starting from a region or just one entity.

For some of you, this may also read like a story from “utopia”, and it probably is. However, if you do not aim for the best approach, you may be left with nothing instead of something.

 

Global approach

Global projects require global teams. It is important that the different regions of the world involved are equally valued and tackled at the same time. Small jurisdictions, maybe realizing only a small part of the turnover/profit may have very strict and complex indirect tax obligations resulting in relatively hefty penalties when violating.

A global approach does not imply that all of the regions must go live at the same time.

All data from all over the world should be first analysed by the global team and brought together to ensure whether any similarities or very specific requirements occur.

It should be avoided to start an automation project based on US sales tax (which is often the case because the project is US driven/funded) and then extent to VAT or GST. Also starting off based on the EU VAT system and then extend it to Latin America is not to be recommended either. Starting with an in-depth study of the global requirements is a far better approach to take before starting the implementation of your VAT automation project. The preparatory work is indeed huge, but in the end, you will gain a lot of time and the quality of your outcome will be a lot higher.

 

The team itself

Overall hands-on project responsible ‘the head of the project’

The Internal Global Indirect Tax Director/Manager or external highly qualified or experienced VAT expert having both in-depth global indirect tax knowledge and tax technology knowledge should be heading the project, or the subject project, because in many cases Automation of Indirect Taxation is part of a large ERP system related project.

I am fully aware of the fact that most projects are funded by IT budgets and therefore often headed by an IT Director or Manager. However, it is really to the overall benefit that being compliant for indirect taxes, takes precedence over IT issues. Being incompliant means that the business might face huge financial risks, which simply means burning cash.

 

Regional Indirect Tax Director/Managers 

Regional Indirect Tax Director/Managers form the core team. Highly experienced as they are, they should be able to analyse, compare, streamline, etc all indirect tax information received from the local VAT/GST/ST Directors/Managers/Consultants. This core team should be able to set the framework to be developed for the automation project. The person is preferably an in-house person, but if there is no such profile in-house available, it should be an external person rather than an in-house equivalent who is less knowledgeable.

 

VAT/GST/ST consultants – preferably internal, if not available external

VAT/GST/ST consultants analysis of the transactions and their VAT treatment per jurisdiction. Those team members should be high level and report to the Regional Indirect Tax Director/Managers. They should be experts in the local indirect tax legislation and indirect tax reporting requirements.

It should be aimed at that some of those team members (especially in-house people) should as much as possible set-up the rules themselves in the VAT automation solution. This way, they gain knowledge on the usage of the tool and it allows them to do the maintenance in the future. Indeed, it may be a big task to train those people, but it will pay off in the future.

The same team should further down the implementation road also write out the test-scenarios.

In-house tax managers or controllers are very often not VAT/GST/ST experts. It is crucial that the analysis is done in a correct way since it will be fed into your automated system which will imply that fewer manual tests are done. Do you only have in-house tax managers or controllers and no real VAT/GST/ST expert for the jurisdiction within your business? Get an experienced external consultant on board!

 

VAT/GST/ST compliance assistants and managers

VAT/GST/ST compliance assistants and managers will have been consulted when analysing all transactional flows and their respective indirect tax treatment and or reporting requirements and obligations.

They should be involved as from the very first testing, so that they can see whether the results do meet the automation requirements. The more those people are involved, the less reluctant they will be towards the VAT automation project. Why would they be reluctant? Very simple, they might fear to become redundant and lose their job. The message to deliver is that by automating their job might change and become much more interesting. Instead of only stressing to meet filing deadlines they can use their stress and time to make sure the reporting is done in a much more correct way. Your actions should be in line with your words as soon as the project starts, and this is a very efficient way to do this.

ERP functional requirements team 

The ERP functional requirements team should consist of a good mix of in-house and external team members. In-house team members who have a thorough knowledge of how your ERP system is set-up (this excludes employees who have just joined the company however senior their position may be) especially if it is not a greenfield approach as well as external team members who have an in-depth knowledge on the automation parameters and condition settings in the ERP system.

 

Testing team

For the bulk testing, you can use subcontractors who are familiar with the automation tool you have selected. This is however an important fact to verify.

 

IT team

From the IT side, you will need database experts, programmers, server experts, very likely cloud experts, etc. I will not elaborate further on this aspect of the team for two reasons. First of all because it is not my personal field of expertise, and secondly, because from my experience, in many cases the business implementing the automation solution foresees enough IT resources dedicated to the project but too few VAT experts.

Conclusion

It is important to have a complete team (except bulk testing of course) working on the automation project from the very beginning, even if not all team members are working full time on the project. It avoids having to restart explaining things as well as not transferring crucial information. Not to forget the feeling of being involved as such. This especially counts for colleagues in more remote locations. Therefore, I also started my blog saying that the different regions of the world involved are to be equally valued. Only this way you create full commitment.

Isabelle Desmeytere

VAT Technology Implementation Consultant - VAT Interim Manager - VAT Software Developer

isabelle@desmeytere.be