For the past two years I’ve been involved in NetSuite ERP tax projects ranging from VAT/GST rate changes (the UK had three changes over two years, Portugal and Italy two each and New Zealand one), the switch to e-filing in many countries and the increased need for a clean audit trail to keep the tax inspectors at bay.
Even in the current tough economic climate, businesses are ensuring that they keep their tax functions well resourced. On the face of it, principles of value added taxation in all countries are broadly the same—charge tax on your sales, recover taxes paid on your purchases and account for the difference.
But the interpretation and implementation of the rules can vary considerably. Add to this the fact that companies use different administrative practices, multiple systems and even outsource tax services, all factors that can have a significant impact on the compliance cost.
A recent Thomson Reuters survey (November 2011) found a 51% increase in the resources global companies allocate to manage indirect tax compliance as compared to five years ago. As governments increasingly seek to raise revenue through indirect taxes, it’s not surprising that companies have been increasing resources in their tax management function to ensure that the calculations are correct and that they are able to successfully withstand any government tax audit.
What have financial software vendors done to ensure that updates to their systems are timely and accurate so that their customers, particularly those that operate in a global environment, remain compliant? The answer is very little. That’s where NetSuite OneWorld and the cloud make a real difference.
The NetSuite Platform Solutions team developed a tool for tax rate changes, such that changes to our customers’ websites, unfulfilled sales orders, item prices and customer records can be automated overnight with very little manual effort involved.
A PwC survey in 2010 concluded that on average it takes a company longer to comply with VAT than with corporate income tax. The chart below shows the average time needed to comply with VAT in each economic/geographic region in a year.
But even within regions the variation can be wide. Two countries in the EU provide a good example of the impact of the length and frequency of returns on the compliance burden. In Ireland, six returns are required each year, and each return has four boxes to be completed. In the Czech Republic, monthly returns are required and each return has 67 boxes to be completed. The time to comply per return is three times longer in the Czech Republic than in Ireland!
At NetSuite, we recognize the need to reduce this huge administrative burden for our global customer base. With the focus on ease of use, multiple languages and familiar looking forms, NetSuite now supports country-specific tax reports for 42 countries. The output is automatically generated on familiar looking forms for each country. Whether for Ireland or the Czech Republic, it takes just a few clicks for the reports to be generated for any country, thus significantly reducing the preparation and filing time required.
The Netherlands VAT (called BTW for Belasting over de Toegevoegde Waarde) report was one of the first delivered by NetSuite. Jacqueline Smits, Operations Manager of VADition Benelux BV, commented, “The new International Tax report saves us about three hours work per month. It has eliminated manual processes combining different and several other reports."
Any multinational with, say, a dozen subsidiaries would save approximately 24 man-days a year in preparation time if they switched to NetSuite OneWorld, in addition to achieving higher confidence in the accuracy and auditability of their tax reporting.
Multinational companies also face a tricky problem internally that is seldom recognized. Adoption of a new system in all global operations can problematic due to user resistance and issues with a lack of will to change and language barriers. To help address those issues, each NetSuite OneWorld VAT report is available in English as well as the native language, thus enabling meaningful conversations between the CFO at the head office and the accountant at the regional office.
Lomography AG, headquartered in Austria with operations in South Korea, France, Italy and Brazil amongst other countries, was one of the first users of the reports. Lomography ERP manager Igor Sarkanovic commented, “The availability of the tax reports in both English as well as the native language promotes internal user adoption, as well as providing the information in a format ready for global consumption."
From what I’ve seen in the marketplace and the various user comments, there is no doubt that the NetSuite solution is streets ahead of the rest, so why not request a demo and see for yourself? I’m certain you will be switching systems in favor of NetSuite if this is just one example of the benefits that NetSuite OneWorld can bring to your business
Kamlesh Rajyaguru - Principle Product Manager - EMEA