VAT compliance driving digital capabilities in the GCC
Muscat: Tax authorities in the Gulf Cooperation Council (GCC) are starting to use sophisticated digital platforms that require taxpayers to submit data in real time or near-real time prompting companies in the GCC to enhance their digital capabilities. This is changing the way businesses collect, format and report tax information, and accelerates reporting and filing obligations.
“The overwhelming view is that VAT compliance has actually accelerated the digital transformation of companies across the GCC. So in addition to being a significant revenue stream, the roll out of VAT is now clearly seen as a means of modernizing the economy and putting the digital journey on the speed track,” Sherif El-Kilany, MENA Tax Leader at EY said.
“Almost all tax professionals polled at our tax conference revealed that their tax administrations in MENA have digitalised or are in the process of digitalising their operations in the next 1–2 years. All of them expect the fiscal and tax policy landscape to change over the next few years, which means the digitisation process will continue at steady pace,” he added.
Respondents to the poll also showed strong reservations around the transparency requirements. More than 75 per cent of them expressed deep concerns on the possible impact for their businesses. Almost all of the poll respondents believe that increased tax transparency will result in an increased number of tax disputes and tax risk profile.
“VAT implementation requires a significant commitment of resources and some organisations do not have the systems, processes and people in place to enable them to apply VAT accurately and efficiently. Most local businesses did not have VAT capabilities already built into their IT systems, while international businesses have had to introduce unique local VAT rules and codes into their ERP systems,” David Stevens, GCC Tax Implementation Leader at EY said.
With the advent of cloud-based solutions, the cost of deployment and maintenance of large applications has come down significantly translating to lower technology costs. In parallel, the cost of sub-optimal compliance is becoming steeper, with transparency and information sharing between and with tax authorities becoming paramount.
“Tax authorities are asking ‘smarter’ and more ‘informed’ questions. Right now, tax departments are made up mostly of tax specialists, accountants and lawyers. The tax function of the future will include experts in software robotics, artificial intelligence and programming, as well,” Sherif said.
During the digital transformation session at the conference, discussions were held on the operating model strategies fit for the digital age, with a blueprint for easy integration with the enterprise. The tax and finance operations session provided businesses with examples of best practices to operate, transform and improve profitability through outsourcing.
“In the future, companies will report and pay their taxes faster, and in turn, will resolve any issues they face faster. The technologies to make this happen are emerging onto the finance scene globally; they’re touching every industry,” he said.
“The regional tax function will become far more sophisticated than it ever has been before. These new technologies will facilitate reporting for Mena businesses amid the global roll-out of tax guidelines from the Organisation for Economic Co-operation and Development (OECD) such as the base erosion and profit shifting (BEPS) initiative,” Sherif added.