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EY Notes Surge In Indirect Tax Burdens, Reforms

by Jason Gorringe, Tax-News.com, London

02 March 2016


More countries than ever are adopting indirect tax regimes in response to revenue shortfalls and digital innovation, according to EY's Indirect Tax in 2016 report.

The report finds that the global trend of increasing indirect tax rates continued in 2016. More than 160 countries are now levying value-added tax (VAT) or goods and services tax (GST) to boost revenue. New indirect tax systems have also been introduced in a number of countries, most notably Puerto Rico from April 2016 – the first US jurisdiction to introduce such a system.

EY said the unprecedented rise in VAT and GST rates is also continuing globally, despite signs that rates are becoming more stable in parts of Europe. It said excise taxes have increased on alcohol and tobacco in numerous countries over the last 12 months, and many have broadened the tax base, or plan to do so. The report says that the rate hikes are in part due to global trends, such as low oil prices, which are requiring governments to offset tax losses.

Gijsbert Bulk, EY's Global Indirect Tax Leader, said: "The indirect tax landscape is seeing huge changes, which brings with it new complexity and cross-border liabilities. New rules and regimes create greater risk of non-compliance, and it is now more important than ever that companies monitor the impact on pricing and margin holistically across the business."

The report adds that digitization is driving jurisdictions to find new ways to draw revenue. EY said the advent of digital consumerism is lowering the tax take from low-value, cross-border purchases and governments are responding. Accordingly, more jurisdictions are implementing electronic auditing, and the amount of data collected is growing exponentially, placing greater administrative burdens on businesses, EY said.

EY reported that governments are increasingly seeking real-time information about transactions, bringing new complexities for businesses using multiple distribution channels and making it more challenging for companies to control their own data.

Bulk said: "A lack of coordination across geographies, and increasing administrative burdens, present new pitfalls for business and increase the urgency for a uniform, global approach to the application of indirect tax systems. Companies need to establish a proactive and robust indirect tax strategy to keep up-to-date with this rapidly changing climate."

TAGS: compliance | tax | business | value added tax (VAT) | goods and services tax (GST) | audit | tax thresholds | tax rates | Puerto Rico | services | Europe | Tax

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