Key takeaways:

• • • Technology leads the way — Companies are prioritizing system upgrades and digital tax management tools to meet new compliance demands under the 2025 reform.

    • Strategic planning is key — Early adopters are integrating reform into their business strategies, while others risk disruption by delaying action.

    • Talent development follows infrastructure — Workforce training is expected to grow as organizations solidify their systems and prepare for long-term success.

Corporate tax departments in Brazil are responding to the country’s sweeping tax reform in myriad ways, upgrading their abilities in both talent and infrastructure, according to a new report from the Thomson Reuters Institute. This reform, approved by Brazil’s National Congress in late-2023, marks a significant departure from the country’s historically fragmented tax system and aims to simplify compliance and improve efficiency across federal, state, and local levels.

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Brazil Tax Reform for Corporate Professionals 2025

At the heart of the reform is the introduction of a dual Value-Added Tax (VAT) structure — comprising the Goods and Services Tax (IBS) and the Contribution on Goods and Services (CBS) — alongside a new excise tax (IS) targeting products with health or environmental implications. These changes are expected to reshape how companies manage tax obligations, credits, and incentives, particularly as the reform phases in between 2026 and 2032.

This new report draws on survey responses from professionals in corporate tax departments across Brazil, offering a snapshot of how organizations are preparing for the transition. While some companies remain in early planning stages, others have already begun adapting their systems and strategies. The report’s findings suggest a growing awareness of the reform’s potential impact and a shift from passive observation to active preparation.

Corporate response in motion

One of the most consistent themes across the report is the prioritization of technology. As Brazilian companies prepare for new tax structures and digital compliance requirements, many are investing in system upgrades and modern tax management solutions. These efforts include refining enterprise resource planning (ERP) systems and their ensuring infrastructure can accommodate new electronic tax documentation formats. The report shows that technology is not just a support function — it’s emerging as the backbone of reform readiness.

Also, the report highlights a clear divide between organizations that are proactively preparing and those that are still waiting for greater regulatory clarity. Early movers are integrating reform considerations into their strategic planning and positioning themselves to turn regulatory change into competitive advantage. Meanwhile, companies that delay action may face higher costs, operational disruption, and even legal risks as deadlines approach.

You can access a full copy of the Thomson Reuters Institute’s “Brazil Tax Reform for Corporate Professionals 2025” in Portuguese here

While talent development is acknowledged as important, it currently trails behind technology and strategy in most organizations’ reform plans. Companies appear to be focusing first on system upgrades and compliance frameworks, suggesting workforce training is expected to follow once foundational changes are in place. However, there is growing recognition that skilled personnel will be essential for sustaining success under the new tax regime. The report suggests that nurturing in-house talent — rather than relying solely on external hires — will be key to the long-term resilience of corporate tax functions and their organizations.

Preparing for transition

Brazil’s sweeping tax reform is reshaping the priorities and operations of the country’s companies and their corporate tax departments. As organizations prepare for the transition, tax professionals across the industry are focusing on strategies that combine regulatory awareness, technological modernization, and strategic investment.

As departments seek to upgrade their tax systems, refine financial planning, and gradually expand their talent development initiatives, they are positioning themselves to navigate the reform with confidence. By aligning internal capabilities with external expertise and embracing automation, our research shows that many corporate tax teams are taking a structured, forward-looking approach that will be essential to ensure compliance, minimize disruption, and unlock long-term efficiencies in Brazil’s evolving tax landscape.

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Regardless, business must go on — and for the makers of products and the providers of services that require goods to move across borders, sleepless nights maybe more a reality than it should.

Indeed, the impact of tariff wars on supply chains is profound. Increased tariffs raise the cost of imported goods, forcing businesses to decide whether they can or would absorb the costs or pass them on to consumers — and either option can lead to a reduction in profit margins. The Thomson Reuters Institute’s underscores the complexities and concerns around corporate supply chains. The report noted that supply chain disruptions remained a constant concern among trading professionals surveyed, and the complexities of managing these problems were significant. And for the majority of the survey respondents, it was their number one strategic priority.

Strategies for readying your supply chain

The coming months and years may continue to be a wild ride, and strategies such as burying one’s head in metaphoric sand isn’t an option (or at least not a good one) or hoping things will soon settle down (it very well might, but business cannot afford to stop and have a wait-and-see moment).

To navigate the challenges of global trade today and the future, proactive strategies that enhance supply chain resilience and flexibility is necessary. And while most business strategies include considerations of such external factors such as geopolitical tensions and trade wars, these concerns necessitate strategies that must be somewhat malleable. As businesses now attempt to successfully navigate the current uncertainty, there are several main considerations for managing supply chains, including:

Diversification of suppliers — One of the most effective ways to mitigate the risks of tariff wars is to diversify your supplier base. By sourcing from multiple countries, businesses can reduce their vulnerability to trade disruptions in any single region. For example, consider suppliers that are in countries with lower tariffs or aren’t subject to tariffs at all.

Go local — On-shore whenever possible. For many businesses, the cost of using locally sourced materials has made it less feasible to use those materials; however, it is worth comparing local sourcing to the rising cost of continuing to get materials abroad amid tariffs disputes.

Agility & flexibility — Having supply chain suppliers that can be flexibility is critical. Suppliers that are amendable to renegotiating contracts, possible absorbing some of the costs resulting from tariffs, and more should be favored. Whenever possible, consider pre-ordering or stocking up on materials and products in advance of possible tariffs increases. Further, if possible, consider if your products could to utilize different materials.

Collaboration & partnerships — Unusual times call for unusual alliances. Having strong relationship with suppliers, logistics providers, and even competitors can increase supply chain resilience. Collaborative efforts can lead to shared resources, combined knowledge, and further innovations that may improve overall supply chain performance.

Investment in technology — Leveraging technology is critical for supply chain management. Using technologies that can provide advanced analytics can assist with predicting and providing models for navigating tariffs and working with suppliers. The rapid speed of changes in tariff policies and regulations requires utilizing technology that can assist with risk management strategy, which often involves identifying potential risks, assessing their impact, and implementing contingency plans. Scenario-planning and stress-testing can help businesses prepare for various trade war scenarios and ensure continuity of operations. Businesses also need technologies that provide real-time government alerts to stay current on trade-classification changes and regulatory trends as well.

Conclusion

In this foreseeable future, it is clear that the global trade environment will continue to present challenges. Tariff wars and protectionist policies are likely to persist, making it essential for businesses to adopt resilient and adaptable supply chain strategies. In a time of tariff wars and increasing complexity, readiness is important. Businesses that invest in supply chain resilience and adaptability will be better equipped to overcome the challenges ahead.

You can find more about how companies can best manage their supply chains here

In order for these managers to develop an effective strategy to address these challenges, they must first understand their department’s status as a business unit, and in doing so there must be certain measurable data points in which productivity and basic standards of success are measured within the department.

The use of is essential for any corporate department or function, as such metrics provide a measurable framework to evaluate the unit’s performance, efficiency, and effectiveness. Corporate tax departments are no exception in that KPIs are necessary to determine how work gets done, by who, and using what methods and tools.

In the Indirect Tax & Compliance report, a plurality of respondents said their biggest impediments to achieving their goals were technology & automation, with 40% citing this as a top challenge, and resource constraints (39%). However, it is also worth noting that when asked how many KPIs were used to measure success within the department, respondents said that on average, their departments were using six, with the top three metrics being measured being the accuracy of tax filing (90%), timeliness of tax preparation (84%), and minimizing cost (64%).

It is important that tax departments have these measurements, of course; but by increasing the number of items measured, departments could more easily identify the areas in which efficiency can be gained. For example, a tax department might be able to successfully accomplish those three KPIs, however upon closer inspection, how they are getting it done could come at a greater cost — think employee burnout due to long working hours, other projects not getting done, and the list goes on.

The need for KPIs

To set themselves up for better success, tax departments should consider a few things around what they measure and why. First, does the tax department fully understand the overall business’ strategic goals? Is it clear how the tax function supports the company’s financial health and compliance objectives? After it has been determined with the best clarity what the tax function’s role is within the organization, KPIs can then be set to help track how the department is doing in relation to those strategic priorities.

Next, the heads of tax departments need to make sure that each team member understands their own role within the group and how their actions can help the group meet its own priorities. Can each employee easily identify their metrics and how it feeds into the overall department’s performance? To ensure success, department leaders should continuously monitor performance against pre-established objectives beyond just getting taxes done right and on time. When this process is done correctly, it can also provide transparency and accountability among the team and lead to better decision-making. Just as importantly, this process allows for the ability to pivot and make a different or even better decision if something isn’t working as expected.

Basing decisions on data

Using data to measure how work is done is one of the best paths toward making better decisions about how to manage a business. And KPIs can help identify inefficiencies within the department, especially around the ways in which employees work and the areas in which resources can be better deployed. They can also help determine where an increase in automation may help and what other technologies can be used to support the tax function as a efficient and effective business unit.

Going beyond tax work and regulatory compliance, tax departments can leverage this data to better provide strategy advisory services to the larger business. Having KPIs that measure the department’s performance beyond tax preparation allows department leaders to think strategically about how the department can provide additional financial insights into such as critical decision as which business activities can yield more profits or savings.

Finally, cost-saving KPIs can play a pivotal role in helping tax departments secure additional budget resources. By tracking and demonstrating efficiency through these KPIs, tax departments can provide concrete evidence of their ability to optimize resources and reduce expenses.

By highlighting successful cost-saving initiatives — such as reducing compliance costs or minimizing tax liabilities through effective planning — tax leaders can showcase their departments’ achievements and make a compelling case for more funding. These KPIs also can identify additional opportunities for cost reduction, supporting the need for investments in new technologies, training, or process automation that promise long-term savings.

Further, aligning these KPIs with the organization’s broader financial goals can demonstrate the tax department’s contribution to overall cost management and profitability. And by regularly reporting on these metrics, departments can foster trust and accountability, making it easier to justify budget increases. In this way, tax departments can present a strong, data-driven argument for the additional resources they need to enhance their efficiency and effectiveness.

Conclusion

The implementation and continuous monitoring of KPIs are necessities for the success of corporate tax departments. These metrics provide a measurable framework to evaluate performance, efficiency, and effectiveness, allowing tax departments to align their operations with the broader strategic goals of the organization.

By understanding their role within the company and setting relevant KPIs, tax departments can ensure that each team member is aware of their contributions towards meeting departmental and organizational objectives. This not only fosters accountability and transparency but also aids in identifying inefficiencies and areas in which resources can be better utilized. Moreover, KPIs can highlight the need for technological investments and automation, further enhancing the department’s efficiency.

Beyond just meeting tax filings and compliance requirements, corporate tax departments can offer strategic advisory services that contribute to their companies’ overall financial health. In essence, KPIs are a critical tool that empowers tax departments to make informed, data-driven decisions, ultimately driving their success and value within the organization.

While the transition to e-invoicing may require upfront investment from businesses, it ultimately promises to streamline operations, enhance financial management, and equalize the playing field by standardizing transaction tracking. Government tax authorities benefit from the increased transparency and real-time data that e-invoicing provides, which aids in more efficient revenue collection and the fight against tax evasion.

The evolution of technology is reshaping various industries, and taxation is no exception. With economic transactions digitalizing, tax authorities worldwide are moving towards more efficient and transparent systems. Clearly, the future of tax compliance will contain a strong focus on the emergence of e-invoicing and other digital innovations that are poised to revolutionize how businesses and individuals comply with government tax regulations.

The rise of e-invoicing

 can be defined as the digital transaction process that an invoice goes through between a buyer and seller. An e-invoice is a document that exchanges invoice information between a supplier and a buyer, differing from a standard invoice (even a PDF shared digitally), in that an e-invoice is issued, transmitted, received, processed, and stored using specific data formats that can be quickly processed through an enterprise resource planning (ERP) system.

Again, one of the major reasons governments are pushing e-invoicing now is to combat VAT fraud that they’ve experienced. Indeed, tax authorities globally, but more specifically in the EU, have encountered losses in what they’re collecting in VAT. In 2021, for example, the EU Commission reported a €60 billion gap in their VAT collection, based on information reported by member states that had estimated  in 2020. Some estimate that more than one-third of the losses could be attributed to VAT fraud linked to intra-EU trade.

To remedy and recoup the gap in VAT, the EU Commission in December 2022 sought to create a system that allowed for ease of use, more transparency, and real-time digital reporting. Building upon a previous tax scheme to manage payment and collection of VAT —  (MOSS), which launched in November 2015 — the EU Commission developed a new version of the , which allowed businesses selling goods across the region to pay VAT to a single tax authority on sales in all EU member states.

E-invoicing, while not a new concept, has been adopted by the EU Commission to make it the standard for e-commerce business transactions.

Global adoption and standards

Now, the adoption of e-invoicing is gaining momentum globally as businesses and governments seek to streamline processes and reduce costs. Ultimately, the EU Commission wants any company doing business within its member states to comply with e-invoicing and e-reporting regulations. However, to date, the adoption throughout the region .

For example, France was scheduled to start on July 1, 2024, but has since moved the date back to September 1, 2026, for large and midsize businesses, and September 1, 2027, for small businesses. The United Kingdom, despite Brexit, continues to align with EU standards to maintain compatibility for business transactions. And Spain and Italy have rolled out their e-reporting and e-invoicing, while Germany and Portugal are scheduled to start in January 2025.

The United States has not federally mandated an adaptation of e-invoicing, however, the U.S. Federal Reserve has been involved in facilitating discussions on standards and interoperability, resulting in frameworks like the , which hopes to boost the use of e-invoicing in transatlantic trade.

Impact on businesses and tax authorities

Introducing mandatory e-invoicing could represent a transformative shift for businesses and tax authorities. For businesses, this transition may include incurring initial setup costs and requiring changes to existing accounting systems. However, e-invoicing also can lead to significant long-term benefits, including enhancing operational efficiencies and seeing potential cost savings. The digitization of invoices would facilitate better invoice tracking and management, possibly leading to improved financial planning and analysis.

For government tax authorities, e-invoicing will increase the visibility and traceability of all transactions, which will help the fight against tax fraud and evasion. The real-time or near-real-time reporting capabilities of e-invoicing allow tax authorities to collect tax revenue faster and perform more effective audits.

The bottom line is that e-invoicing and e-reporting will promote the standardization of how e-commerce business transactions are tracked, making it easier for companies involved to comply with global tax requirements. E-invoicing can also level the playing field, as all businesses must adhere to the same standards, reducing the competitive advantage that might arise from non-compliance.

While the shift to e-invoicing may present initial challenges, it promises considerable benefits to both companies and government tax authorities for the efficiency and integrity of business transactions and tax systems.

You can find more information about the here.

Countries around the world — such as Australia, Japan, the United Kingdom, and member countries of the European Union — are implementing Pillar 2, which means that multinational corporations operating in those countries must soon adhere to new tax rules and reporting obligations.

For multinational corporations’ tax departments, Pillar 2 ushers in a host of new challenges, including more complex tax calculations, additional reporting and compliance obligations, a higher risk of tax controversies, and an array of additional costs and other considerations. And yet, according to , many companies are still wrestling with major decisions about how to comply with Pillar 2 requirements mere months before the new tax rules are enacted.

Preparing for Pillar 2

“Pillar 2 is going to require significant additional controls and data,” says Alistair Pepper, a managing director in KPMG’s Washington National Tax practice. “Most companies are still working through exactly what this means and what they need to do in order to fulfill Pillar 2 reporting obligations.”

KPMG’s research involved interviews with chief tax officers (CTOs) and senior tax leaders from approximately 100 multinational corporations that generate $1 billion or more in revenue, 75% of which operate in more than 25 jurisdictions. Overall, 82% of respondents that KPMG interviewed said they were actively preparing for Pillar 2, primarily by addressing questions about additional staffing and technology, as well as data flows, inter-departmental communications, budgeting, and available safe harbors.

Data is perhaps the most complex component of Pillar 2 compliance. Not only must companies have access to consistent data in order to calculate their tax burden under the new rules, but they must also adapt their internal processes, controls, and systems to gather and report data even as the OECD continues to issue clarificatory guidance about how the rules should be applied.

“The new Pillar 2 rules are quite extensive and involve hundreds of data points that companies don’t necessarily have access to,” says KPMG’s Pepper. “As a result, we’re seeing lots of groups look at transitional (country-by-country) safe harbors that allow them to defer the full calculation for up to three years, giving them time to fill data gaps and get the additional data they need.”

Pillar 2 contains three transitional safe harbors — a simplified effective tax rate, a routine profits test, and a de minimis test — all of which relieve those multinational corporations operating in low-risk countries from having to report full Pillar 2 calculations until Dec. 31, 2026. According to Pepper, a majority of KPMG clients will likely qualify for safe harbors in some jurisdictions.

Indeed, while 85% of the respondents to the KPMG survey said they had initiated discussions with upper management about the additional administrative and compliance costs associated with Pillar 2 preparation, only 11% had asked for and received the extra budget needed to cover those costs. The three-year extension that safe harbors provide may be one reason Pillar 2 compliance costs have yet to be budgeted.

Additional costs: technology and staff

Though Pepper says it is difficult to estimate what the total cost of Pillar 2 compliance will be for any given company, the bulk of the additional spending is likely to be directed toward in-house technological upgrades, additional staff, and possible third-party assistance.

On the technological side, Pepper explains, many companies will need to invest in upgrades to their enterprise resource planning (ERP) systems to get the data they need. On top of this, “people will need some kind of Pillar 2 calculation engine that takes your income and taxes and tells you whether you are above or below the 15% tax threshold.” Those with jurisdictions below the 15% threshold will have to pay a top-up tax to reach 15%.

Additional staff will also likely be needed to collect and manage the data required for Pillar 2, Pepper says. According to the KPMG research, 57% of respondents from multinational corporations surveyed said they expect to hire additional full-time staff at the junior level to handle tasks related to Pillar 2, and 46% plan to hire extra managerial staff. And 18% said they expect additional hires at the director level, and 4% are looking for a new VP. Just 11% said they are unsure if they will need extra staff at all.

For multinational corporations’ tax departments, Pillar 2 ushers in a host of new challenges, including more complex tax calculations, additional reporting and compliance obligations, a higher risk of tax controversies, and an array of additional costs and other considerations.

Multinational corporations are also engaged in a healthy debate about whether to manage Pillar 2 requirements in-house or co-source reporting obligations with a third-party provider. According to the KPMG research, 54% of respondents interviewed said their companies are considering co-sourcing their tax function to leverage a third-party firm’s tax expertise and stronger technological capabilities. However, 36% said they prefer to manage Pillar 2 requirements in-house to avoid dependence on a third-party provider and its tools. Other costs associated with Pillar 2 compliance include a surge in external audit costs (expected by 69% of those surveyed) and a rise in tax liabilities.

For Pepper, however, the most interesting statistic uncovered by the KPMG research is that 27% of respondents said they expect Pillar 2 to have no effect whatsoever on their companies’ tax liability, and an additional 57% said they expect their companies’ liability to increase by less than $50 million.

Pepper says that “some people are asking the question: Is Pillar 2 really worth it?” After all, he adds, many companies are going to be put in the position of having to invest in the technology, people, and systems necessary to meet the requirements for Pillar Two, only to report that they do not owe significant additional taxes.

“The biggest companies are fairly well prepared for Pillar 2,” Pepper says. “It’s the small- and medium-sized businesses that are still getting up to speed on what these rules mean and what they need to do from a systems standpoint. It’s difficult, though, because these rules are a moving target and will remain so for an extended period — possibly up to five years.”

Still preparing?

In the meantime, Pepper advises those companies still preparing for Pillar 2 to:

• • • determine if and how the company can benefit from safe harbors;
    • estimate the impact of Pillar 2 on the company’s financial reporting; and
    • decide which compliance strategy and model the company should adopt.

Finally, communication with executive management is paramount, says Pepper, because while 73% of the tax professionals KPMG interviewed said they had already discussed the potential compliance and Pillar 2’s administrative costs, 27% said they had not, or had only discussed it in high-level terms.

“Pillar 2 involves more than the tax department,” Pepper explains, adding that the additional costs associated with Pillar 2 preparation are going to require support and approval from the top. If the tax department has yet to engage executive-level management about Pillar 2 compliance, it should do so now, he advises, because Pillar 2 compliance can’t be put on the backburner for much longer without any consequences.

The key to surviving these challenges, (some old and some new) may lie in the lessons learned over the last couple of years.

To better understand the challenges that the global supply chain is facing, we spoke to Brian Wenck, CEO of , a global supply chain (GSC) logistics and technology company, to get a viewpoint from someone on the inside.

Before the pandemic, the global supply chain was primarily optimized to provide efficiency in line with the demands of just-in-time manufacturing; but during the course of the pandemic, this approach has been hamstrung by disruption. The pandemic caused port delays, transport aircraft shortages, and halts in component manufacturing which have resulted in extreme uncertainty in delivery times, which in turn caused further disruptions. GSC companies like Flat World have had to rapidly adapt from providing not only efficient transportation, but flexible resilience as well.

“We have clients who, because of the pandemic, couldn’t move the raw materials needed when they were needed, and when they did move it, they couldn’t manufacture due to labor issues — so, they got backlogged,” Wenck says, adding that to fix this, the company needed to figure out how to bring in the product and process it within two weeks. “Well, that’s not a ship, that’s a plane, and this is going to take up more cargo space then most planes can handle,” he explains.

For example, the Antonov is the largest cargo plane in the world, and Flat World needed this plane multiple times to do this job, Wenck says, adding that led to lots of questions. “What is its availability? How much is this going to cost?”

Normally, the client would probably pay somewhere between $100,000 and $200,000 to have all of this product brought in over a three-month period, he explains. “Now, it has to happen in two weeks, and we had to talk to them about $1.2 million dollars in transportation costs.”

Navigating the learning period

The early days of the pandemic were a crucible for creating the capabilities on which the global supply chain is now reliant for survival. This is because 2020 benefited from both decreased demand and a greater tolerance for disruption, factors which gave firms the opportunity to learn.

Within this learning period, GSC companies have mastered a variety of new transportation methods, overcome initial coordination problems, and now regularly provide these extraordinary measures with greatly reduced costs. Imagine for a moment what the current situation would look like if these companies �徱���’t have 2020 as a learning environment. The current situation would almost certainly be far worse as greater shipping costs and shortages would supercharge inflation globally.

The stressful part, however, is that this is unlikely to be the only major crisis for the supply chain industry within the next few years.

One crisis that is slowly but inevitably looming strikes at the foundation of modern logistics. A combination of factors including long-run macroeconomics, low population growth, generational shifts in working preferences, and the pandemic have resulted in an ongoing shortage of truckdrivers in the United States as well as other highly developed economies such as the United Kingdom and Japan.

Simply put, older drivers are retiring, and the industry cannot entice enough young drivers to replace them. Even as driver pay and signing bonuses reach unprecedented levels (with Walmart offering drivers a starting annual salary of $100,000), the shortage remains acute and is only getting worse. In many cases, supply chain disruptions are being caused not because operations at a port are keeping cargo ships from being unloaded, but because there are no drivers to transport the crates to their final destinations. As shortages of drivers in other countries show, such disruptions can severely hamper not just the supply chain but even the operations of the entire economy.

The early days of the pandemic were a crucible for creating the capabilities on which the global supply chain is now reliant for survival.

The obvious solution to this driver shortage — self-driving trucks which could supplement or even outright replace drivers — seems tantalizingly close given the progress major car manufacturers have been making in this area. Despite that apparent progress however, the technology is simply not at the point where it can be implemented on a large scale, and even some of the sunniest predictions make this option a non-factor until the latter end of the decade. Yet, automation and artificial intelligence may still be solution — rather than replacing drivers, however, their greatest aid may be in enhancing the flexibility of the system itself.

For example, Flat World already is using artificial intelligence’s predictive capabilities to model future demand, Wenck says. By using both historical and real time data, the company could look at multiple routes and select the ones least likely to foresee disruption given not just current conditions, but those likely to form based on the directional volume of the market.

In other words, rather than act as a replacement for drivers, GSCs can utilizing AI’s clerical and analytical skills as a force multiplier. This type of solution could buy time for the arrival of larger types of automation, allowing GSCs to manage the driver shortage crisis before its worst effects are realized. It’s also a demonstration of how the type of flexibility born from the pandemic is likely to be highly relevant in future crises.

Yet, some crises are easier to predict than others. Numerous potential pitfalls lie beneath the umbrella of environmental, social, and governance (ESG) issues, some of them forecastable, others less so. (Indeed, our interview with Wenck took place just before the current events in Ukraine, but we did discuss how theoretical conflicts and long-term concerns could impact the supply chain.) Wenck’s conclusion was that the supply chain was going to have to act like water, finding its level as the terrain changed around it.

While the future impacts of the lingering COVID-19 pandemic and labor supply shortages are somewhat predictable, the future of ESG is certainly less so. In such a world, fluidity reigns as king.

Indirect taxes can be seen everywhere — retail sales tax, value-added taxes, and negative-incentive taxes on products such as sugary foods, cigarettes, alcohol, or gasoline. “In a way, indirect taxes can control socio-economic behaviors and help shape economies as negative behaviors are penalized with taxation,” Grove says.

Not surprisingly, the growth of indirect taxes was accelerated by the COVID-19 pandemic, as e-commerce activity around the globe skyrocketed, with online spending representing 21% of total retail sales last year, compared with 15% in 2019, according to a Digital Commerce 360 analysis. Online sales volume is a big component of indirect taxes, a fact that was underscored by the U.S. Supreme Court’s 2018 Wayfair decision that allows states to require that companies collect sales and use taxes even when the company making the sale does not have a physical presence in that state.

As the use of indirect taxes increases, however, the burden on the corporate tax teams behind those retailers and manufacturers — those tax pros that have to calculate the level of an indirect tax, depending on product classification, location, and a host of other factors — has grown, especially as sellers need to instantaneously make these tax calculations to ensure smooth transactions with consumers buying their products.

The just-released report, , published by ��������, shows just how dire the situation presented by increased indirect taxes use can be to businesses. “Indirect taxes pose an increasing risk to companies,” the report noted, “but with the right investment in talent and technology, indirect tax teams can move beyond compliance to add value by improving customer relationships, cashflow, and risk mitigation.”

Moving to the edge

The growing pressure of this untenable situation has ramped up the need for solutions to address sellers’ concerns. And that’s where edge computing enters the picture.

Edge computing allows retailers and manufacturers to bring their transactional tools much closer to the source of the transaction, while staying connected to the larger network. For example, Amazon’s Alexa or the Apple watch are examples of edge computing products that move their companies — Amazon or Apple — much closer to the transaction and the consumer. “The tech industry has been saying for some time that there is value in moving closer to the transaction,” Grove explains, noting that allowing sellers’ use of edge computing products to capture data and information, maximize the control and speed of transactions, all while staying connected to the cloud, has demonstrable benefits for sellers’ tax teams that can help make the business case for increased tech investment.

In terms of indirect taxes, these edge computing tools can allow retailers, manufacturers, and wholesalers to calculate the correct level of tax right there as the consumer is making the transaction, while still staying connected to the company’s larger tax engine in the cloud. Currently, most of these businesses have their tax engines on-premises, which grants them a certain amount of control over the process; however, it does force businesses to absorb the cost of outdated technologies, such as when they have to take their tax systems off-line so they can do updates.

“What you’re seeing with edge computing is really not so much a step between on-premise tax engines and in-the-cloud tax engines, but rather a step beyond both to offer proximity to the transaction while remaining linked to the cloud,” Grove notes. “It’s really the future of the tax engine model.”

In the Indirect Tax report, survey respondents who said they wanted to move their tax function to a more value-adding role said they saw technology as fundamental to improving their work. However, they also noted that making the business case to company management for investment in indirect tax tech solutions was daunting and usually had to be triggered by a cataclysmic event, such as a negative audit, evidence of tax overpayments, or other errors. Conversely, another trigger was simply the pressure caused by the company’s business growth outstripping the capacity of the indirect tax team to manage workflow using the existing systems.

“Too often, people fall short of appreciating the technology they have and what it costs,” Grove says, noting that as edge computing transactions tools re-configure how companies address their indirect tax issues, making the business case for their adoption should become easier.

You can learn more about here.

The number of countries implementing a value-added tax has tripled in the last three decades, and the portion of the corporate tax bill received from indirect taxes on production and imports (as opposed to corporate income tax) was more than 87% in 2018.

Little wonder as governments seek to repair their balance sheets after the global pandemic, that they’re turning to the more palatable indirect taxes rather than raising income taxes. The rub, of course, is that governments are requiring companies to calculate and collect indirect taxes on the government’s behalf… and quickly. Little wonder too, that corporate tax teams are increasingly concerned with the growth of indirect taxes and how they will keep up with that growing workflow.

To study how indirect taxes are impacting corporate tax departments, �������� has published a new study, , which surveyed more than 30 corporate tax directors around the world in a variety of industries about the impact that the growth of indirect taxes was having on their departments and how they were handling it.

Based on these conversations, there is little doubt that for many companies, especially those operating in multiple jurisdictions with a variety of products and services, the indirect tax burden is increasing. Many corporate tax teams are under great pressure as they try to ensure compliance, while battling internally with too-often outdated manual processes and poor data, and, externally, with increasing demands from tax authorities.

You can download a copy of the full report, , here. And you can download here.

The new report finds that while indirect taxes pose an increasing risk to companies, a combination of the right investment in talent and technology can lift indirect tax teams beyond compliance, allowing them to add value to their companies’ bottom lines by improving customer relationships, contributing to cashflow, and enhancing risk mitigation.

The Indirect Tax report is broken down into three parts:

1. 1. 1. The growing challenges faced by indirect tax teams;
      2. The role of indirect tax teams within the larger organization and the skills needed to meet the challenges; and
      3. The use of technology to support indirect tax teams.

Indeed, our in-depth interviews with tax team leaders shed light on the significant opportunities available. Because indirect tax teams work with almost every other department within the company, they can leverage their expertise and knowledge to add real value beyond simply complying with indirect tax regulations. Handled properly, the wealth of data these teams can offer could provide a unique insight into a company’s supply chain, customer behavior, and cashflows.

Of course, indirect tax teams themselves are hungry for additional technology investment to improve automation and increase the efficiency and speed of their work processes. Yet, while our survey respondents were clear on the benefits of investing in new technology and tech-savvy tax professionals, they also recognized the challenges they face in implementing new tech, such as collecting and cleaning their data, minimizing customization of new tech, and, crucially, ensuring the involvement of all users as early as possible.

Finally, as the report spells out, while there are a small number of corporate tax departments that have already pivoted to an in-house strategic advisory role, with a fully automated compliance function, the vast majority of corporate tax teams are immediately concerned with remaining in compliance in a rapidly-changing world while still using imperfect or outdated systems and processes. For them, as the report indicates, the journey continues.

VAT is a consumption tax that is applied to nearly all goods and services that are bought and sold for use across many countries. It is said to raise about both worldwide and among the members of the Organization for Economic Co-operation and Development (OECD).

Yet, what are the new VAT rule changes that have just taken effect? And what will those changes mean for e-commerce businesses that operate within and outside of the EU with their end customers in the EU?

These changes allow e-commerce businesses to have a more simplistic VAT processes. Businesses can now register with one Member State authority and pay tax to all remaining Member States, Gunjan Tripathi, Senior Proposition Manager, Indirect Tax, �������� Europe) says, adding that this framework will make it easier to provide one clearinghouse, so to speak. Thus, businesses will have to deal with just one administration (with which they may be familiar or share common language with) rather than up to 27 different ones.

One of the first comprehensive VAT regulations for ecommerce enabled business were introduced in 2015 but were limited to services only i.e., applied to telecommunications, broadcasting, and electronically supplied services to consumers within EU Member States. Building on the success of that first phase, the changes from 1^st July 2021 have extended the regime to include sale of goods enabled by e-commerce businesses, thereby broadening the scope of the legislation. “These regulations apply not only to the EU based sellers, but to any non-EU based business that sells into the EU,” says Tripathi. “The policy intention of the EU is to level the playing field between domestic and foreign suppliers of goods via e-commerce channels.”

These modified rules will affect online sellers, online electronic interface or digital platforms, postal operators, and couriers. With the  caused by the pandemic, these changes are set to be far reaching and – in some cases – complicated and are bound to require changes to business IT systems and logistics processes.

Here are 4 myths about these new regulations

Myth #1: Businesses are only required to make payments to one jurisdiction in the EU

Well, yes and no… the July 1 changes are focused to ease the burden of VAT reporting and payment for ecommerce businesses, when goods are destined to EU consumers. The practical aspect is that each of the 27 EU Member States may have different VAT rates for the same goods or services. Hence businesses need to understand, track, and apply the different VAT rates on their goods and services based on where they will be consumed, thereby complying with the ‘destination principle’.

 can also select one of the 27 EU Member States for its VAT registration and reporting obligations. This simply means that instead of having to make 27 separate payments and declarations to each of the Member States, instead one consolidated payment and filing is made to the country of registration which will then redistribute the VAT payments & data attributable to each of the other Member States. Hence why the usage of term ‘One Stop Shop’ to distinguish this regime from the domestic VAT return registration and obligations that operate on a one-to-one basis with each Member State.

Myth #2: The new VAT regulations create simplicity

Streamlining VAT collection, declaration and payment doesn’t necessarily equate to simplicity. For instance, a non-EU business would still have to pay attention to any physical locations within EU borders where the goods are stored either by them directly or on their behalf by a third party. Businesses must be mindful if there is a discrepancy between billing versus shipping addresses. In case of goods, the shipping address is the strongest indicator of where they are destined to be consumed. In case of services, it is harder to determine the consumption destination if the billing address doesn’t match the recipient’s physical location (IP address used as acceptable proxy).

Therefore, businesses need to utilize this opportunity to understand their supply chains and customer consumption patterns in a more granular way than ever before.

Myth #3: I can worry about my VAT liability after the event

If you are taking this chance and given VAT rates can range from 0% to 27% across the EU, imagine the impact it can have on your net profit after taxes.

Each country has its own tax rate, and therefore the business must make sure it has the correct rate for each location factored into their financial planning and analysis. These new VAT regulations were enacted to create a simpler and more systemic way of tracking VAT payments from e-commerce businesses across the EU. For businesses with clients in the EU, it is now critical to make sure that there is a clear understanding of each country’s product and service classifications and corresponding VAT.

Given the complexity, the optimal solution for a business will always be found when working in a collaborative manner with their tax, finance, logistics and IT teams.

Myth #4: The tax team is solely responsible to navigate through these regulatory changes

The tax team alone doesn’t have complete visibility of logistics and payment processes within a business. Without this knowledge, their analysis and advice to the businesses can still fall short of the intended regulations.

Therefore, it’s important for all departments to be aware of the far-reaching impact that these regulations have and work to empower the tax team in ensuring the business is compliant and profitable. These changes can also give an opportunity for a business to embark on a process optimization and digitalization journey by leveraging this regulatory change as the compelling event for change.

If you want to learn more about the EU’s VAT regulations,  check out our recent and

For states, this is a way to generate new tax revenue through changes in compliance and enforcement, rather than enacting a “new” tax or raising rates. Indeed, marketplace tax collection is gaining steam outside the United States, as well, including:

Asia Pacific — Australia first adopted value-added tax (VAT) collection rules for digital marketplaces in 2017, and New Zealand enacted marketplace goods & services tax rules in 2019.

Europe — In Germany, marketplace facilitators can now be held liable for unpaid VAT on third-party sales through their platforms. And as of January 1, France requires marketplaces to collect and report on certain taxable transactions by third-party sellers. These policies will expand throughout the European Union (EU) next year when qualifying online platforms will be deemed the supplier, for VAT collection purposes, for certain low-value goods and facilitated transactions.

Click here for more on and how new rules could impact your business.

Marketplaces also will need to keep “sufficiently detailed” information to ensure that VAT is collected when non-EU companies sell to EU consumers through the marketplace’s platform.

Latin America — Countries throughout Central and South America also are beginning to look to marketplaces for indirect tax collection and reporting.

Compliance challenges for platforms & sellers

In the U.S., each state has crafted its own criteria for what activities will cause a platform to be considered a marketplace facilitator — typically some combination of listing or advertising third-party products for sale and then facilitating those sales through fulfillment, payment processing, or handling returns.

Companies such as Amazon and eBay are marketplace facilitators in most, if not all states that have passed these laws. But the impact is not limited to these major players. Any company involved in third-party sales needs to evaluate whether it falls within a jurisdiction’s definition of “marketplace,” and multi-channel sellers need to consider which of their sales channels will be collecting taxes on their behalf.

Some states have adopted a broad definition, which leaves companies responsible for sales tax collection even if they never handle the customer’s payment. As these practical limitations to compliance arise, states will likely continue amending their criteria, which means that the precise definition of marketplace — and every seller’s tax collection obligation — is a moving target.

Most states have taken the position that marketplaces and sellers cannot opt-out of these new regimes by changing their respective tax collection and reporting obligations with private agreements. In light of this, a company’s tax exposure may not be fully within its ability to control. This can be particularly challenging for industries with complex tax rules, like oil & gas or telecommunications.

Companies in these industries often have robust systems for ensuring accurate collection and remittance of these highly technical taxes, while newly deemed marketplaces may not have the technology or know-how in place to similarly comply.

In addition, the laws passed thus far apply only to sales and use taxes, not additional transaction taxes, so there could be multiple collectors and remitters on the same transaction. Industry groups are urging states to carve out exceptions for certain industries, but it’s unlikely these eventual exceptions will be uniform across all jurisdictions.

Who’s responsible for regulatory requirements?

With an eye toward new tax revenue, jurisdictions are rapidly moving forward with implementation despite the questions that remain. For example, it’s unclear in some cases where the burden of audits, documentation, and other due diligence activities will ultimately land.

Most states have said the marketplace itself is the party subject to audit, rather than the third-party seller (except in cases where the seller provided incorrect taxability information to the marketplace). However, third-party sellers still may need to comply with record-keeping requirements because improper tax calculation can impact vendor and customer relationships even when the error is attributable to the marketplace.

Marketplaces need the ability to rapidly scale in order to handle tax calculation on potentially millions of transactions around the world. Third-party sellers, meanwhile, need to verify that marketplaces are handling their tax calculation correctly and that no transactions are slipping through the cracks. Given that sellers can ultimately be held liable for tax collection in some cases, it’s important for them to retain a reliable audit trail of data for all transactions, regardless of the sales channel.

With the rules for marketplaces not yet fixed or fully defined, sellers and marketplaces must be able to show a consistent tax policy with comprehensive, reliable data in order to demonstrate a good faith effort to comply in this uncertain environment.

For marketplace facilitators and multi-channel sellers, the right tax technology can ensure the ability to comply with these new rules while also providing flexibility to adapt as tax authorities further expand and refine their laws.

A version of this article appeared in .