Tax Efficient Supply Chain Management Services

Transcription

1 ASIA PACIFIC Tax Efficient Supply Chain Management Services Helping Global Companies Achieve Enterprise-wide Efficiencies TAX

2 2008 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG

3 Conquering today s supply chain challenges Companies are expanding their supply chains across the globe, seeking new markets and capturing cost efficiencies. Yet with every new link forged in a supply chain there are new operating costs to consider. Leading companies recognise that comprehensive tax planning across their supply chain structure can open up opportunities to drive global cost savings and mitigate risks. A comprehensive approach is needed that identifies all supply chain costs, including taxes. KPMG s Tax Efficient Supply Chain Management (TESCM) services can help KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

4 2 Tax Efficient Supply Chain Management Services At KPMG, we understand the importance of aligning tax and business considerations across the supply chain. Our broad experience enables us to work with companies to evaluate, design and implement changes to their supply chains that integrate tax with business objectives. The benefits can be significant, including realisation of taxenhanced operational benefits, integrated operations and business models, and an overall reduced risk profile. International Trade Outpaces Economic Growth Exports Imports Nominal GDP (US$ at PPP) Source: EIU data combines the total from Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea According to the 2008 World Development Indicators issued by the World Bank, developing economies now account for 41 percent of the world s output, up from 36 percent in The growth in trade from Asian countries have been particularly relevant and continues to outpace overall economic growth. These trends also reflect the increasing integration of the global market and the opportunities created by looking beyond one s own borders. Facing new global complexities A growing number of companies are turning to global markets to expand. Competition is driving many companies that historically have focused on the domestic market to globalise and find new, low-cost supply sources. For example: Enterprises with manufacturing operations in Asia are now also looking to source from new locations within the region in order to manage country-specific risks and take advantage of lower cost production facilities. Asian companies are expanding rapidly into new markets and reaching new clients around the globe. Multinational enterprises are competing for a share of Asia s fast-growing Asian consumer markets. We live in a world of highly interdependent markets for goods, services, finance, labour, and ideas. When we measure economies on a comparable global scale, the growing clout of developing countries comes into sharp relief. - Alan Gelb - the Acting World Bank Chief Economist and Senior Vice President for Development Economics. Source: Press Release 2008/265/DEC World Bank Foreign Direct Investment (FDI)/Gross Domestic Product (GDP) versus headline domestic Corporate Income Tax rates FDI/GDP 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% Hong Kong Singapore China Taiwan South Korea Vietnam Malaysia Thailand New Zealand India Australia Philippines Indonesia Japan 0.00% 15.00% 20.00% 25.00% 30.00% 35.00% Corporate Income Tax Rate Source: FITA, EIU Attractive corporate income tax rates can be a driver to stimulate foreign direct investment into an economy. Note: This chart does not include other national and/or local taxation (or tax incentives) that could impact the overall effective income tax rate, for example the application of local business taxes, surcharges and taxes on distribution KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG

5 Tax Efficient Supply Chain Management Services 3 Such extensions of the supply chain create many new complexities, for example in a company s human resources, legal, tax, IT, marketing, R&D, and finance functions. Integrating tax and supply chain planning is one way that successful companies can turn these complexities to their advantage. Taking a proactive approach The first step in effective, proactive planning is to recognize the central role that the tax function can play and the value it can bring to global supply chain planning. It is important to understand that tax concerns need to be considered before any changes are made to a supply chain. The largest opportunities often arise due to related fundamental changes in business models and supply chains as a result of: Mergers or acquisitions and post-acquisition operational integration Corporate restructurings Significant new plant developments, expansions, and capital expenditures R&D spending and technology breakthroughs Centralisation of functions, risks, and other activities. Identifying and being in a position to address opportunities arising from these kinds of changes requires the proactive involvement and early integration of the tax function into the process. It is imperative, however, that companies looking into developing cost-efficient business models and supply chains institute a culture of cross-functional collaboration and proactive planning. This can be achieved by clear leadership and communication from the board and executive committee. We understand the issues Understanding the range of tax issues is critical to cost-effective supply chain management. Modern supply chains can cut across many tax and regulatory environments. Successfully managing the issues in these different jurisdictions requires not only understanding but also the ability to shape the supply chains to meet the total business objectives. KPMG s TESCM professionals offer extensive global tax knowledge and industry experience, and a proactive, cross-functional approach. KPMG s TESCM professionals can help to: Perform supply chain location analysis, considering key decision criteria and issues such as labor costs, infrastructure, and framework Address demand and supply variability through inventory positioning and valuation analysis Business Performance Management Issues: Global sourcing Contract manufacturing Shared services Process efficiencies Cost optimisation Capacity management Distribution network management Freight and logistics Sales and distribution TESCM Perform total cost analysis (from manufacturing to the customer) and distribution scenario analysis Manage customs compliance and identify opportunities to manage indirect tax issues to improve cash flows and meet compliance requirements Prepare transfer pricing documentation Reduce duty costs and improve cross-border movements with various customs programs such as free trade agreements, customs unions and free/ foreign trade zones Develop operating structures, including procurement, manufacturing and distribution to help managing total landed costs of goods Identify opportunities for incentive packages, for example income tax and other credits in the local jurisdiction Assess the benefits and facilitate planning, analysis, and implementation of shared service centres. Tax Considerations: Asset dispositions Transfer pricing Profit repatriation Customs and trade zones Location of taxable events Indirect taxes Permanent establishment issues Local taxation Incentives (corporate/individual) 2008 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG

6 4 Tax Efficient Supply Chain Management Services The cornerstones of effective integration A number of factors, or cornerstones, must be in place for effective integration to be achieved. At KPMG we call these factors the CAPE cornerstones: Communicate: Tax and operations departments need to speak with one another consistently to ensure that each side s constraints are understood and common ground is identified. Analyse: It is one thing to know the current status of the business and the compliance requirements of various tax jurisdictions. It s another to stay on top of planned business changes, pending legislation, and changing economic conditions across multiple tax jurisdictions. Execute: The operations and tax teams have come together and forged a plan to overcome issues. Now it is time to implement plans and galvanise the new structure. We bring global understanding and crossfunctional experience Having the right approach will not achieve the expected benefits if one does not have the right experience to implement it. That s where KPMG s TESCM team can help. Our crossfunctional teams provide project management experience to develop and implement the right solutions for each client. We draw upon the resources of KPMG member firms, including professionals in Tax and Advisory Services and those with industryspecific experience. KPMG member firms can deliver a consistency of services through their ability to: Bring together professionals with tax and operational experience from around the world Provide thought leadership on leading practices Map out tax-efficient supply chain structures Facilitate internal discussions Provide project management experience Assist in plan implementation. Plan: After analysing a desirable jurisdiction, it is up to the supply chain management team, including tax members, to plan for the future stateof-being when the company adopts a new structure KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG

7 Contact Us For more information on how KPMG s Tax Efficient Supply Chain Management services can help your organisation, contact your local KPMG adviser or: Chris Abbiss Principal and Regional Leader, TESCM [email protected] Dick Nijdam Asia Pacific Regional Tax Director, TESCM [email protected] KPMG 8th Floor, Prince s Building 10 Chater Road Central, Hong Kong Tel: Fax: KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG

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