The Big 4 audit firms first and foremost offer external audit, but they also have other service lines namely tax, risk and advisory. The tax service line is further split into two categories:
- VAT and Tax Compliance: such as submitting returns.
- VAT and Tax Consulting: such a drafting a tax opinion or advising on a transaction.
When using an audit firm, you pay by the hour for tax compliance or consulting work. These services are frequently used by companies that say, “we need an outsourced tax person to do our VAT return and for tax advice.” So, every single month, without fail, these organisations will get the audit firm in to complete the VAT return who will then bill for their time. This time could be anything from R750 to R1500 per hour, multiplied by the numbers of hours that it takes them, with tax partners charging significantly higher for their tax consulting or opinions. These ongoing costs, when annualised, can be quite substantial.
If a company used an outsourced firm or tax person for either their compliance or consulting work, there is no realistic way to bring those tax skills or processes in-house, unless the firm or tax professional you’re utilising is training someone within the company to do it. But this would go against their business model. If it is outsourced, it normally stays outsourced.
Where it makes complete sense to use an audit firm for consulting advice is, for example, when you acquire a new business and you want to make sure that the VAT and tax treatment is accurate; that is the kind of thing you want an expert to review and set up correctly from the start to prevent assurance and compliance issues later down the line.
When it comes to the compliance work, this will eventually be replaced by technology. Technology allows organisations to easily compile and submit numerous VAT returns, even if they are utilising multiple ERP systems. Once a technology solution is implemented and set up there is no ongoing cost every time you want to run a VAT return. They then also offer the ability for you to go deeper and do your own data analysis too. If you are merely outsourcing the compliance work, this kind of analysis would never be readily available.
Another area where technology makes sense is for risk and control VAT analytics. Yes, the audit firms can come in and perform the analytics, but it is a once off exercise sometimes well after the fact. As the audit firm will charge for their time every single time they run the analytics, they won’t be repeated often. Analytics are always going to be more beneficial when they are automated, real-time and continuous, picking up issues as they happen and allowing you to monitor if things are going wrong or improving. Technology allows you to have a more efficient data-driven approach.
When choosing a VAT Technology solution, you empower finance and tax users with a data-driven solution to do their work better and better understand your business. You are investing in your people by building the tax skill inhouse and gain internal efficiencies. A VAT technology, like VATSURE, has built in tax IP and will also provide free access to a knowledge base, such as TradeTaxPlus
In summary if you are just assessing the costs, it is more lucrative to go with a technology solution such as VATSURE. Software will never replace the full value of a consulting firm, such as making use of the firm’s contacts at SARS or if an important tax opinion is required. But, it is important to know that there is a place for technology if what you are doing is very routine, repetitive VAT data analytics, then technology just makes sense.