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The Dirty Little Secret of Hidden Transaction Taxes
Benjamin Franklin uttered his famous words "In this world, nothing is certain but death and taxes" more than 200 years ago, and in today's global economy, taxes-especially transaction-based taxes-still stand. These taxes are ubiquitous and extremely complex; more than 140 countries use a Value-Added Tax (VAT) model, and the United States' Sales and Use Tax (SUT) model is encumbered with more than 7,000 different tax jurisdictions and regulations. Policy and legislation are constantly changing, and the corporation bears the brunt of compliance with tax laws and dealing with the local bureaucracies, whose job it is to enforce them. Today, the CFO is tagged with two big initiatives: accelerate cash flow and optimize profitability, while ensuring legal and ethical compliance. Tax software vendor Sabrix is trying to help companies better manage and gain visibility into transaction tax exposure-on the sell and buy side. A recent discussion with a leading professional accounting firm pinpointed a few areas where money is tied up in the transaction tax area: The large amounts of time spent researching tax rates, maintaining disparate tax systems, and estimating tax liability, often because of the lack of a centralized taxing module. Cash is stalled, either through overpayment as your suppliers tax you incorrectly, in dispute resolution when you tax your customers incorrectly, or through delays in receiving refunds of tax from local tax administrations. The cost of compliance to support more aggressive government audits and avoid the potential risk of penalty. The company's experience has indicated that firms can save at least 0.1% of top-line revenue by implementing a Sabrix system; for a $5B firm, that's approximately $5M. The more complex the business and system environment, the greater the potential returns. The Sabrix software has been designed to easily integrate into a variety of enterprise applications that control order processing and procurement using an Extensible Markup Language (XML) adapter, and is implemented as a centralized taxing service for any applications that need tax data. The company, through expert partnerships, also takes responsibility to research and deliver tax updates on an ongoing basis, alleviating internal development work to modify tax rules. Using this application, the CFO and his or her team can strategically manage tax exposure, reduce cost of compliance, and manage penalty risk. Along the way, company profitability can improve and cost of capital can be reduced through accelerated cash flow. Transaction taxes don't have to be a dirty secret anymore. -- John Hagerty Questions, comments, or problems regarding this service? Please contact webmaster@amrresearch.com Copyright © 2002 AMR Research, Inc. |
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