The shift towards indirect tax and what this means for the graduate or trainee of today
Unless you’ve been living under a rock, you’ll have noticed that global tax issues are taking their fair share of news headlines these days. This is primarily represented by the mainstream media’s observations of EU tax avoidance amongst many corporate giants (for instance Google, Facebook, Starbucks, Apple, McDonald’s, and Amazon to name a few!). Whether the media are speculating on 'tax avoidance' (the legal use of tax laws to reduce one's taxes) or 'tax evasion' (a term used in a criminal context to reflect the illegal misrepresentation of taxable income), tax always makes a grabbing headline. And we saw plenty of this last year, ranging from MNCs in the EU to the Panama Papers.
At the same time, the non-tax person of today who follows any kind of ‘news’ app is also seeing a lot of talk about other tax issues. Whether that’s tax digitalisation, the drafting of a landmark GST bill in India, talks about the UK leaving the EU VAT regime in a ‘hard Brexit’, other major economies implementing a value-added tax, or even Jeremy Corbyn’s accusations of a sweetheart deal underpinning a Tory-run Surrey county council seat.
Whether it’s on a local or international scale, tax is thoroughly on the agenda of our news tablets.
Sifting through these headlines, many of today’s tax affairs make a compelling (and quite attractive) case for why the graduate or trainee accountant of today might seriously consider delving down the specialist ‘indirect tax’ path as opposed to the traditional 360 degree tax positions or the popular routes of corporate tax.
For such job seekers (or future job seekers), it’s therefore certainly worth paying attention to the global rise of indirect tax.
The rise of indirect tax
One of the ongoing commentaries amongst tax professionals and economists over the last couple of years has been focused on the shift from direct taxes to indirect taxes.
The OECD's most recent figures indicates that corporate tax revenues have continued to fall since the global economic crisis, whilst VAT revenues climb. By 2014, VAT revenue had reached 20.1% of total tax revenue and it’s speculated that this trend will continue due to the various changes taking place in the global tax market.
Many major economies, for instance, are now introducing Customs & Excise duties and a value-added taxation. Think of China, whose pilot VAT programme seems to have moved a long way since 2012, or even India’s passing of the historic GST bill last summer. Both China and India represent a huge push in the global spread of indirect taxation. Even in recent weeks, we’ve seen a significant step forward in the journey of VAT implementation across the GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE) as Saudi Arabia approved an IMF-backed value-added tax to be imposed across the Gulf as a measure for tackling the oil revenues slump from 2014. Several days later, the remaining GCC countries signed the much-delayed unified VAT framework agreement.
And on the other side of the pond, indirect tax has worked it’s way into President Trump’s agenda as he seeks out a financial solution for ‘The Wall’ in a proposed border tax scheme (see how a border tax could work here).
On the peripherals of all this global indirect tax activity, let’s not forget about the ever-growing demand for tax technology which is playing a huge role in reinventing the indirect tax market! This alone is fuelling interesting debates and having a huge impact on tax recruitment demands.
What does this mean for your career?
Whether it’s through legislation or the push for digitisation, the global tax industry is evolving and reinventing itself at a rapid pace. In fact, there’s probably been more changes in the last 5 years of tax than there has in the last 30 years!
From a recruitment perspective, you should be thinking about this.
The apparent shift from CIT to indirect tax makes a compelling case for why the graduate of today should seriously consider a career in this arena. Here’s why:
This is just a sample of - what I feel - are the key reasons why the indirect tax profession makes an extremely viable and attractive route for the graduate or trainee accountant of today. But, if I could stress one point out of the above, it would be the prospect of developing that mile deep, inch wide knowledge in an increasingly important market. Now seems like an excellent time to seriously be thinking about an indirect tax career.
However, whilst my opinions may shed some light on the attractiveness of an indirect tax career, there’s certainly more value in hearing the opinions of those who have taken this journey themselves.
For the Part 2 of this article, I have interviewed Daniela Alexandru (Senior Services Delivery Manager, TMF Group) and we discussed her experiences with beginning a career in indirect tax and what trainees in the field should be thinking about today.
Alex Mann is an Associate Director in the Tax Division at Harvey John.
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