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Indirect Tax

Getting up to speed with VAT/GST in emerging markets

Emerging markets are at the forefront of the global shift from direct to indirect taxation.

Reduced corporate tax rates in many countries and new or enhanced value-added-tax (VAT) or goods-and-services-tax (GST) are causing the shift.

VAT/GST implementation is invariably challenging, but there’s no need to make it any more difficult than it needs to be by leaving it until the last minute or by only involving tax and finance teams. Your entire business needs to be responsive to this change as every function, from marketing to human resources, will be affected. To minimise
business disruption, thorough planning and disciplined project management, mobilisation and governance are required.

Drawing on insights gained from working with clients on the implementation of VAT/GST in a variety of emerging markets, this article looks at how to make sure your business is up to speed with planning, applying the new requirements and dealing with the strategic implications.

In an earlier article, we discussed why governments are looking to introduce or revamp VAT/GST systems and the business challenges this presents. 

Consumption taxes like VAT/GST are recognised to be a more effective mechanism of capturing tax domestically in today’s digital environment. Governments also like VAT/GST because it enables them to maintain tax revenues, while offering competitive corporate and personal tax rates. A well-developed and pervasive consumption tax allows multiple fiscal levers to be pulled to create a competitive tax landscape.

In reality however, when implementing a VAT/GST there are multiple issues and complexities to consider and address, such as:

  • Political sensitivity
  • Price, profit and reputation
  • Operational challenges
  • International reach

If we put these multifaceted and often overlapping challenges together, it's clear that VAT/GST is a whole of business change, which touches multiple business operations in varying degrees.

Should you have queries or comments on the issues raised here or in the article following, Grant Thornton’s indirect tax specialists are available.