Business
Businesses must be proactive to review the storm ahead
Global Banking & Finance Review®
Company
By Alex Baulf, senior director, Global Indirect Tax at Avalara, offers his reflections on the tax implications of the Spring Statement on businesses
As we emerge from the pandemic and grapple with geopolitical turmoil and supply chain tensions, the constant price hikes and tax changes create profound uncertainty in the UK. Though the Chancellor has made gestures of support in his recent Spring Statement, it’s evident that the economy is undergoing major upheaval.
Undoubtedly, the government could have done more to ease the tax burden for businesses by holding off the rise in National Insurance contributions and being more generous with VAT. The hospitality sector, for example, was calling for the 12.5% relief rate to remain in place.
But the big VAT headline is the zero rate introduction on energy-saving materials for residential accommodation. This would have been impossible pre-Brexit as it goes beyond the constraints of the EU VAT Directive.
Another issue surrounding the Spring Statement relates to energy prices. Although the government took some remedial action to support households facing enormous cost hikes, businesses remain exposed, with Sunak declining to match the domestic £350 business rate rebate, as requested by the Federation of Small Businesses.
Uncertainty will remain for some time
Brexit, the pandemic, the Ukraine crisis, and highly volatile markets and supply chains create a perfect storm of uncertainty for any government looking to shield businesses completely.
This volatile situation continues to have a considerable knock-on effect on companies, leading to many organisations feeling overwhelmed by the ongoing prospect of navigating their business and employees through these changes and keeping up with rates adjustments, deadlines, and tax compliance responsibilities.
But just as significantly, their customers will also feel the pinch, creating unprecedented purchase scrutiny from consumers and commercial buyers, who are scouring the value of products and services before investing.
Businesses must be proactive
While companies may feel as though their financial fortunes currently lie out of their hands, businesses can take proactive steps to mitigate the impact of the volatile economy, especially around taxation.
With digital tax reforms being rolled out across Europe, companies can anticipate future tax changes, embrace digitisation, and streamline financial processes, to ensure complete visibility over the supply chain and the relevant taxes.
This will help businesses eliminate surprises, maintain a happy customer experience and avoid being penalised under new regimes.
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