If you run operations across multiple jurisdictions you may need to invest in the support of an experienced tech companies that can help you connect the dots.

Steven Smith, Europe Proposition Lead, Corporates, at Thomson Reuters, looks at the challenges that businesses face in being tax compliant across indirect tax, corporate tax returns and year-end accounts across multiple jurisdictions. 

Governments around the world are rapidly moving away from the established ‘old’ standard of gathering taxpayers’ information. These changes are not uniform and vary from country to country, with, for example, Spain requesting invoice details every four days, Hungary demanding them at the point of invoicing, and Italy adopting a clearance model (with Greece following suit in 2020).

Fraud and tax avoidance are the driving forces behind governments refining tax processes. By adding transparency to the invoicing process, tax authorities can quickly identify where one party or another may be cheating the system. In countries, such as India, goods and services taxes (GST) have been introduced, which enable authorities to see both sides of a transaction. China has also introduced a very similar process. It really boils down to compliance and data. If a multinational organisation is striving to comply across different jurisdictions, it must be sure that its data is correct, even before an invoice is raised. Are the buyer details correct? Does the invoice meet the criteria to calculate the correct VAT liability? All of this data needs to be present before the finance department starts raising invoices.

Tax avoidance in the UK is not on the same scale when compared to countries like Brazil and Poland. Indeed, HMRC believes that UK corporate taxpayers are far more compliant and as a result it is very unlikely to introduce intrusive reporting such as Security Industry Association (SIA), however, there is still a gap that needs to be filled so initiatives such as Making Tax Digital (MTD) are only the start of more detailed information requests.

But meeting MTD in the UK is just one thing. It’s a very different story for multinationals. Many are firefighting and taking a ‘sticking plaster’ approach to help meet the myriad of tax requirements across different territories. They tend to focus on one particular country at a time, and that focus is driven by audits. And then once that requirement has been met, they simply switch their ‘firefighting’ mode to the next country and wherever the greater risk for non-compliance rests. However, they’re missing a huge opportunity by taking this case-by-case approach rather than looking at the entire organisation’s global footprint.

Meeting MTD in the UK is just one thing. It’s a very different story for multinationals. Many are firefighting and taking a ‘sticking plaster’ approach to help meet the myriad of tax requirements across different territories.

The sticking plaster approach of hopping from one country audit to the next has left a huge mess and many organisations are now in the position where they could be much smarter in the way they store and utilise their tax data. Organisations need to review how much business they’re doing country by country and prioritise by compliance risks. Now is the time to clean up and identify and rectify problem areas before the authorities come calling.

No company is the same and so it is difficult for businesses to know which country to concentrate their efforts on at a particular time. What they can do though is connect the tax dots. By working with a technology partner that operates across multiple jurisdictions and by prioritising countries, organisations can work to meet immediate requirements and add other countries as they come onboard. Working with one partner to meet these requirements means there’s no need to repeatedly hire new people, partners or add different processes as all the tools are available in one place.

Connecting the dots isn’t just about working more effectively across multiple countries though. It’s also about how invoices and indirect tax relates to the company’s corporate tax position, about corporate pricing arrangements and corporate income tax. And it’s about connecting all that internal information and driving greater collaboration across the tax and finance departments so that all parties have a clearer view of the organisation’s financial position.

MTD is just a tiny piece of the indirect tax puzzle, yet keeping records digitally will not only help to ensure a business is compliant but will also provide far greater insight into operations. Global businesses will always have more important, more urgent things to focus on, but they’d be mistaken to ignore the opportunity digital tax has to offer the business, as well as the tax authorities.

Financial education is a crucial part of any child’s development. However, with research revealing that the UK’s debt levels rising year on year, it’s beginning to look as though not enough is being done to ensure a future of smart spenders.

Financial Literacy

The concept of ‘financial literacy’ has once more become a cause for widespread debate in the UK, with millennials and those following them now being labelled ‘generation debt’.

While there are services and support in place to help Brits better understand how to manage their money, a culture of easy-access finance and convoluted contract leasing terms has left many people in a position where it’s unlikely they’ll ever be totally debt-free.

To put the situation in perspective, research conducted by credit reporting experts Credit Angel has found the following eye-opening personal finance stats:

• The average person in the UK owes £8,000 (this is on top of any mortgage debt)
• 50% of the UK’s population is considered financially vulnerable
• 25 to 34-year olds are the most likely to be saddled with debts
• Over 4 million people in the UK are thought to be in serious financial difficulty
• More than 6 million Brits don’t believe that they will ever be debt free

Is the UK Financially Illiterate?

Looking at these findings, it’s clear that something is missing from people’s understanding of financial management. This is a skill that should be taught from an early age and, as of 2014, the UK government introduced lessons on this very concept into the school curriculum.

While there is a lot of emphasis placed on the practical applications of students’ knowledge, 65% of UK teachers believe the current approach is ineffective.

As the way in which we interact with goods, services and the concept of money change rapidly – it’s leaving schools to play catch up. With this in mind, it’s not really surprising that during the first six months of 2017, 64% of calls to debt management charity StepChange were from people aged under 40.

Generation Debt

Education is inextricably tied to an understanding of personal finance, with a lot of peoples’ first experiences of debt coming from their time in university. For instance, many students from the poorest backgrounds, who often need more support in the form of loans, will graduate owing over £57,000.

As interest charges start as soon as the course begins, students will accrue, on average, £5,800 of additional debt by the time they have graduated. This is one of the many financial realities younger people are often not fully warned about when taking their first steps into adulthood.

From student debt to credit cards, the total UK credit card debt hit £70.1bn as of the end of 2017. That equates to £2,579 per household. For a card with average interest rates it would take a staggering 26 years and 3 months to pay off each household’s debt with minimum monthly repayments.

While it’s not an exclusively millennial problem, there is an undoubted trend towards people in that age range suffering the most in terms of financial issues. It’s clear that something needs to be done to practically educate children in the implications of financial products and the issues that can be caused by debt.

However, we may have to wait a while longer for a real solution. As of the start of 2018, net lending to individuals in the UK increased daily by £126.8m and the total amount owed out by Brits was £1.57bn. According to the Citizens Advice Bureau, they are dealing with almost 3,000 new debt problems each day.

As this trend towards the UK as a nation of debtors continues, it’s clear that steps must be taken to better educate Brits on money management from a young age to avoid a cycle of personal debt that will continue for generations.

In support of the tenth annual My Money Week last week, Equifax partnered with Young Enterprise in order to equip young people to grow-up with the life skills, knowledge and confidence they need to successfully earn and manage money.

Underlining the need for broader awareness amongst young people of the cost of the things they want – and how they might be financed - the credit information provider has released research which reveals that a third of parents admitted feeling pressured by their child to buy them the latest technology, and 35% felt pressured to buy fashionable clothing for their children.

“Our findings suggest that some parents are feeling under pressure to spend on their children when they may already be financially stretched,” explains David Stiffler, Vice President of Global Corporate Social Responsibility at Equifax. “As well as spending money on technology, nearly a quarter of parents said they have been put under pressure to keep up with the latest gaming devices and online apps, and a further 29% said their child pressured them to buy the latest toy craze.

“More than ever before, Equifax is committed to making a difference to the communities in which we live and work and My Money Week is a fantastic opportunity to encourage both parents and schools to help the younger generation appreciate financial values. The right attitude about money management starts at home so it is very encouraging to see a campaign that will teach children more about managing money in a way that is practical and relevant to them.”

The Equifax research also highlights how 11% of parents will spend between £51-£100 just on technology such as tablets, laptops and smart phones, for their child every school year. A further 10% admit to spending between £151- £200.

Russell Winnard, Head of Educator Facing Programme and Services at Young Enterprise, said: “It is important to have the right foundations from an early age to ensure that young people continue to manage their money well throughout their life. The aim of My Money Week is to improve financial capability for young people in primary and secondary schools. It’s all about teachers and parents inspiring young people to be financially literate, and the statistics from Equifax demonstrate just how important it is to learn about finances from an early age.”

To help parents keep control of their budget, Equifax has added an interactive Equifax Budget Planner to the tools on its website.

(Source: Equifax)