In today's rapidly evolving business landscape, the synergy between tax and operational strategies is more crucial than ever. As organizations strive to maintain a competitive edge, aligning tax and supply chain strategies can unlock significant advantages in terms of speed, cost, and overall efficiency. By fostering collaboration between tax and operational leaders, companies can help ensure that supply chain decisions are made with a keen eye on total tax posture, ultimately driving greater value across the organization. This comprehensive approach not only helps mitigate compliance risks but strengthens tax operations to adapt seamlessly to business changes. As we navigate potential economic challenges, including new or increased tariffs, businesses that integrate these strategies may be better positioned to enhance cash flow, improve resilience, and secure long-term competitive advantages.
1. Balance Operational and Tax Efficiency
When an organization’s tax and operational leaders work closely together, the organization will have an edge over the competition in terms of speed and cost. Aligning tax and supply chain strategies can help ensure that all supply chain decisions are made in a tax-efficient manner.
To provide timely and meaningful insights regarding tax implications while mapping supply chain strategy, tax departments must be able to provide projections to operational leaders quickly. Tax technology can help increase the speed at which tax departments are able to provide such insights to the broader business.
A robust data management strategy is also important to improve the tax department’s ability to capture and analyze data. Technology is not a cure-all; however, companies need to invest in training to ensure their people can realize the full benefits of the tools they adopt. The right tax technology and associated training can empower members of the tax department to take on a broader strategic advisory role to operational leaders beyond the tax department.
Learn more about how to transform your tax department to drive greater value.
2. Manage Your Organization’s Total Tax Liability
Companies navigating their total tax liability in the context of supply chain planning must find opportunities to achieve tax savings while avoiding decisions that have an unwanted tax impact.
For example, many companies are considering adjustments to their operations to reduce reliance on one region or country amid supply chain disruption. Moving any asset – whether production facilities, intellectual property, or even customer data – can incur exit taxes. If unaccounted for in initial calculations, these exit taxes can lead to significant tax liabilities for an organization that can take years to recover from.
Omitting tax considerations at the outset of planning may also lead to missed opportunities for tax savings. For example, if supply chain leaders are not aware of all the federal, state, and local incentives available to companies that onshore operations to the U.S., they may miss key tax savings opportunities when the business undergoes the transition.
Learn how to gain greater insight into your business’s total tax liability.
3. Manage and Mitigate Tax Compliance Risk
Tax authorities around the world are stepping up their scrutiny of taxpayers to recoup lost revenues from the past few years of economic turbulence. This makes it critical for companies to update their transfer pricing policies and align them with their current business practices. If your organization’s tax structure falls out of sync with its operating model, it could be subject to additional tax exposure in the form of tax disputes or double taxation.
Tax leaders also need to keep supply chain leaders apprised of possible changes to global tax rules. This way, an organization can avoid pursuing supply chain strategies that could be disadvantageous from a tax standpoint. For example, offshoring production to another country could expose an organization to increased tariffs if political relationships become unfavorable and trade treaties change.
Learn how we helped a manufacturer minimize tax risk and achieve savings.
4. Future-Proof Your Tax Operations
If your organization’s tax planning approach is reactive to its supply chain strategy, the organization may be stuck with a patchwork tax structure that requires continual updates. Future-proofing your organization’s tax structure means building a foundation that is flexible and aligned with its business goals.
Consider creating a playbook for adjusting your organization’s tax structure as part of major business decisions, such as relocating parts of its supply chain, integrating new operations via M&A, changing suppliers, or entering a new market. This way, your business won’t have to start from scratch with each operational decision.
The Way Forward
As businesses prepare for further volatility, many will consider significant changes to their supply chain to increase cash flow and improve resilience. Organizations that have aligned supply chain and tax strategies may be able to pursue these approaches more successfully. With increased efficiency, they may also secure competitive advantages that would put them ahead of the competition in the long run. Learn about BDO’s Global Value Chain and its holistic approach to improving your organization’s supply chain.