Regional and local tax strategies- how they affect the supply chain

There is an almost endless amount of businesses in this modern-day and age and a select part of them wish to - or have already- take their business on a global scale. Globalization is key to truly scaling your business to a magnificently high scale and to truly make your mark on this economically advanced world, however, it isn't exactly easy. When one wishes to take his/ hers business global they should consider taxes as different countries handle taxes in different ways.

The abundantly diverse ways different countries choose to handle their taxes systems play a key role in a company decides to not factor in taxes and duties in its supply chain design. This could be due to specific countries, similar to Brazil, whose complex tax laws interfere with multiple businesses prefer to not take into account taxes and duties for reasons as simple as they "cannot understand".

The supply chain itself is a system which constitutes a business's core, it is the methodology on how the business runs it's profits, growth, and costs. When considering whether or not to evaluate taxes and duties you must take into consideration that the global tax rate is 20% this can cost a company millions annually which is quite the price to pay. However, an argument has two sides to it and some may argue that a good business should be able to reap the benefits of taxes and duties by optimizing it to achieve the lowest taxes possible. Here are a few reasons why you should implement tax and duties in your supply chain design.

Lost savings:

The potential risk of losing out on savings by not considering regional trades and concessions.

Competition:

Smaller price competitiveness since you are not including

Any free trade agreements.

Plan:

Not having the ability to react fast enough can hold a burden on your financial situation and cause operational consequences

Long term analysis:

Finding out the issues of taxes and duties in future strategic issues such as mergers and acquisitions can be fundamentally vital globally and competitively wise.

The perks and benefits of including taxes and duties may outweigh the cons, however, tax Optimization is a key factor and when leveraged to your advantage can reduce taxes a great deal. Tax Optimization in a supply chain design often includes planning the tax costs and credits as well as logistics and manufacture costs into the supply chain design global businesses will be able to minimize taxes and costs. The best way to go about this is to use modelling technology. Modeling technology can be used to:

Design optimal supply changes strategies based on regulation changes

Quantify benefits from free trade zones and regional trade concessions

Measure impacts from various taxes

Final Verdict:

Overall, regional and local tax strategies pressure global businesses and companies to not include taxes in their supply chase design this leads them to lose profits and such and it is all caused by a misunderstanding between different countries tax laws.

This article was partly sourced from https://logisticsviewpoints.com/2taxes-and-duties- in-supply-chain-design/

This is were I had referenced my article from.