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Tax Preparation Outsourcing: What to Outsource and What to Retain

Author

Monica Neumann

https://www.linkedin.com/in/monica-neumann-pmp/
monica.neumann@auxis.com

PMP | Sr. Manager - Finance Transformation

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As indirect taxes become a leading revenue stream for governments worldwide, navigating the wealth of complex and country-specific tax regulations is more challenging than ever for companies that compete on the global stage. With robust technical capabilities, best practices, global tax experience, and a deep understanding of industry and business issues, the right tax preparation outsourcing partner can help you manage risk with exemplary execution.

In this blog, we will examine what tax processes are typically good candidates for outsourcing versus retaining internally based on our decades of experience in the shared services and finance outsourcing space.

Even though traditional accounting functions such as Accounts Payable, Accounts Receivable and General Accounting are more common candidates for outsourcing, the tax function also involves many repetitive, transactional processes that should lend themselves well for outsourcing with the right migration approach and partner.

How tax preparation outsourcing services can improve the finance function

In today’s world, taxation is not just about traditional, direct sources like profits, income, and wealth – it’s increasingly focused on indirect tax streams like transactions, ;distribution, and production.

As government reliance on indirect tax revenue increases, expanding into new markets often means grappling with fast-changing regulations and intensive scrutiny against indirect ;tax fraud – demanding new levels of governance, accountability, and transparency for compliance.

For instance, Value-Added Tax (VAT) – the most popular form of indirect tax – now raises about 20% of tax revenues globally. VAT is levied on consumers of goods and services throughout the supply chain, rather than companies selling them.

In some countries, VAT revenue is even greater. For example, in Chile, VAT represents 40% of total tax revenue.

As a result, tax authorities are requiring greater disclosure of transaction tax data as part of tax-related electronic invoicing mandates in Latin America and other parts of the world, as well as insight into how organizations manage indirect taxes.

Understanding and adapting to each country’s unique tax requirements can be fraught with challenges – and even small missteps can lead to fines, penalties, and reputational damage with tax authorities. Indirect tax regulations also typically require time-consuming monthly filings and even weekly reportings, with 67% of organizations in a recent KPMG survey managing throughput exceeding $200 million each year – and 32% managing more than $1 billion.

Outsourcing these tedious complianceactivities enables enterprise tax teams to focus on higher-value responsibilities, like com