How tax can support customer-led transformation

Over the last couple of years, global disruption has impacted the behaviour of customers and presented new business challenges – including volatility in supply, decline in brand stickiness and the ever increasing impact of technology. At the same time, customer expectations have been continually changing. So to accelerate revenue growth in a responsible way, businesses need to become customer centric and digitally enabled.

As a result, Customer-led transformation (CLT) - focusing on customer engagement, acquisition and retention - has risen to the top of agendas across a range of sectors. CLT looks at a diverse range of issues, from use of data and technology through to better linkage between data and marketing, customer experience and commercial management, among other factors.

What is important depends on the sector and the commercial model. For example, in the healthcare sector, patient experience might be key, while in consumer products groups, a greater emphasis may be put on pricing and promotions.

All quite removed from tax, you might think. However, in a post-BEPS (base erosion and profit shifting) world, alignment between tax and the business operating model of multinationals has never been more important - understanding the tax implications of who does what and where and how is critical.

When considering marketing and customer service transformation, the location and nature of the functions gives rise to a range of tax considerations – from availability of incentives and people-related taxes through to transfer pricing and profit attribution. If, for example, customer service is transformed from being routine to value added in nature, there are clearly tax implications with the potential for efficiency and the need to manage tax cost and risk.

Looking at digitalisation – be it channels to market, use of data or AI - triggers not only consideration of digital tax initiatives such as the plethora of domestic Digital Services Taxes (DSTs) in force or OECD Pillar one and two proposals, but wider questions of what is driving the value in your business.

Or consider what happens when a company innovates around new product and service offerings or expands into new markets. This can lead to a host of tax considerations: creation and taxation of IP, availability of IP incentives and R&D tax credits, new supply chains with direct and indirect tax consequences, and the associated compliance and reporting requirements.

Close involvement of the tax function with the business is key to managing risks, identifying opportunities for tax efficiency and facilitating critical business initiatives in the CLT arena. It’s a good conversation to have before embarking on a project.

Get in touch to discuss.