How to Make TAX a Tremendously Awesome eXperience When Expanding Overseas

I’m worried about tax. You’re worried about tax. Let’s be honest, we’re all worried about tax. In fact, 69% of retail business owners either agreed or strongly agreed with the statement: “Ensuring we stay compliant with tax obligations and regulations is the most stressful thing about running my business.” Remaining tax compliant involves hours of paperwork and storing financial records for years. It can be a pain, and at the end of the day, your business is probably still bleeding money trying to navigate the thousands of differing tax regulations worldwide. All in all, it’s no wonder that TAX is a commonly used acronym which stands for a “Torturously Anxious eXperience.”

Business is great and you’re looking to expand overseas but you’re also staring down the barrel of a triple-barrel shotgun. So let’s talk about the three main problems that will contribute to your Torturously Anxious Experience over the coming years. Don’t worry, I’ll also throw in a few tips on how to dodge the bullet and steer clear of these problems.

Wouldn’t it be great if the world had one set of regulations and one never-changing tax rate? This blog would be easy, and the title could have been “10 Painless Steps To Get (and stay) Tax Compliant Forever.” Unfortunately, at some point in the 17th Century, humans decided to implement the strange concept of international (and state) borders, independent governments and individual countries.

Tax Rates Fluctuate

So, now, if you want to expand your business internationally, things get a whole lot more complicated because each country has diverged with their individual tax systems. Perhaps more alarmingly, these rates are likely to fluctuate due to changes in the economy at least a couple of times each year. I know what you’re thinking: I’ll just tune in around the 1st of January and 1st of July each year and see what changes apply. Unfortunately, it’s not so simple. In April (2022), 17 States in the US saw adjustments to their sales tax regulations in one way or another.

My point? You’ve got to be watching and adjusting to local tax changes all year round: it’s a full-time job, and you’ve got more important things to focus on. Constantly questioning your tax compliance is estimated to cost SME’s £386 Million in gross-value added (GVA) each year, with £53 Million considered to be indirectly wasted on time spent understanding and implementing new EU VAT schemes.

One New Market ≠ One Tax Jurisdiction

But it gets even worse… Even within an individual country (where in theory, everything should be standardised, right?), there could be multiple different tax rates and regulations. In fact, there are over 11,000 individual tax jurisdictions in the United States, and, in some cases, you could slash your sales tax in half by moving right next door. As a result of cross border tax complexities, UK exporters lost an estimated £47.6 Billion in revenue in 2021.

This figure was only for European exports (it doesn’t even consider those brave businesses exporting over to the USA).

Offering Product Returns Just Got a Whole Lot Harder

If you don’t have a returns policy: you should! And if you haven’t read our previous blog on dealing with product returns: you should! Click here to read more.

Having a returns policy is very important. But (why is there always a but?) it does make taxes even more complicated. When a customer purchases a product, VAT is included in the price, but this comes out of your account when you pay it forward to the government. When a customer returns an item, you refund them the full amount (including VAT), leaving you out of pocket. 65% of VAT paid on returned goods is never recovered, which means that for every £1 of VAT paid, £0.05 should have been recovered but wasn’t. This tells us that, even within the UK, businesses are neglecting money they’re entitled to due to a lack of education. Now imagine how many UK retailers would claim that back from a foreign system. Would you know how to do it?

The Solution

So, by now, I’ve painted a pretty grim picture, and you’re thinking about closing this blog and just sticking to what you know: expanding overseas seems like way too much effort anyway. But wait! Now I’m going to tell you about a beautiful thing that goes by the name of SuiteTax.

I’m referring to a system that drives efficiency by automating tax calculations in the exact same place that companies keep track of payment processing, billing, sales and returns. I’m referring to all your data in one place. Most importantly, I’m referring to the solution to the three problems that we’ve mentioned. With SuiteTax, there is no need to monitor tax rates as they are automatically updated to NetSuite accounts each month. Multiple tax jurisdictions per subsidiary won’t be an issue either, as you can integrate various tax partner engines to tailor a solution to your geographical requirements in each new market. In the end, a centralised solution such as NetSuite means greater visibility over all aspects of your business, even across multiple subsidiaries meaning real-time reporting of transactional-level data worldwide.

So it’s up to you: will dealing with TAX be a Torturously Anxious Experience or will you face that triple-barrel shotgun head on and turn the whole process into a Therapeutically Awesome eXperience with the confidence of continued tax compliance?