An Oracle and Harvard Business Review (HBR) study has revealed predictions that the soon-to-be implemented VAT in the GCC will initiate a massive wave of digital transformation, as businesses prepare to ensure compliance with the new tax law.
The study, which is based on a poll of 450 senior company executives from across industries, reveals that 73 percent of businesses consider VAT implementation as a key opportunity to initiate wider digital transformation projects within their organisation. With businesses required to automate their processes to ensure that transactions are captured flawlessly for VAT compliance, 66 percent of respondents also said that they would consider transitioning their business processes from on-premises systems to the cloud if major cost savings can be identified.
“Cloud adoption across GCC countries is growing at a rapid pace and becoming mainstream as businesses now realise that cloud applications offer them speed, innovation, security, and better return on investment,” said Arun Khehar, senior vice president – SaaS, ECEMEA, Oracle. “IDC estimates that public cloud spending across the META region will reach 715 million USD in 2017 and VAT compliance is expected to further drive this trend.”
“There are several benefits of placing tax functionality in the cloud, as the applications are updated by vendors on a regular basis; if the amount of VAT changes, or if another tax regulation is put in place, system upgrades will be automatically rolled out with the next release. More importantly, with VAT in the UAE and Saudi Arabia taking effect on 1st January 2018, it is important for organisations to ensure timely preparedness, which an ERP Cloud solution can achieve within weeks.”
With the VAT compliance deadline quickly nearing, the Oracle/HBR study also explored the current VAT preparedness levels of businesses across GCC. While 21 percent of respondents confirmed that they have initiated preparations to be VAT compliant; 30 percent indicated that they currently have limited information on VAT.
In addition, 47 percent of respondents said that they are awaiting further guidance from local governments before initiating their VAT compliance project.
Furthermore, when asked about the biggest obstacles on their journey to be VAT-compliant, 68 percent of respondents said that managing business process changes would be a key challenge. “We also believe that a lack of tax expertise in the region will pose a problem for businesses, which was confirmed by 38 percent of respondents citing a lack of qualified internal tax experts as a key challenge in the lead up to the implementation, while another 35 percent were found to be uncertain about the changes that a new technology implementation would bring,” added Khehar.
When asked which sectors would face the most challenges in the run up to January, Khehar said he believed SMEs and private sector would require the most amount of assistance. “There is a large SME space here in the region, but due to the fact that they typically have less money and expertise than larger organisations, I believe they will need the most education in the run up to January to ensure they are compliant,” he said.
“With just a few months until VAT goes live, many companies urgently need to change their business processes, IT systems, and scale up their workforce,” said Aarti Mohan, ERP and EPM application strategy leader, Oracle. “Our advice to all businesses is to start now with a 360 assessment across the business to evaluate the potential impact and transformation needs to quickly become VAT-compliant.”