Tax-efficient supply chain planning in a COVID-19 world

Tax-aligned supply chain planning: New priorities, strategies, and business models

Your tax team should be prepared for changes to your company’s value chain strategy due to shifts in global strategies and business models, impacting various segments of the end-to-end supply chain. These supply chain changes may have direct and indirect tax consequences across multiple geographies.

Business leaders have shifted to new decision criteria for key tax-aligned supply chain considerations including an increased focus on transparency and risk management (for example, establishing centralized control towers to monitor suppliers and production status), liquidity and cash management, and shifting to regional and local models to address changes in supply and demand.

You may also experience changes to your supply chain—and related tax impacts—such as location of people and functions, adoption of new and different business models, or entering or exiting markets. For example, labor shortages, reduced headcounts, and travel restrictions in certain key geographies may impact existing local tax incentives. In the case of a new or modified business model or value chain strategy, tax should be consulted for alignment with transfer pricing policies. Such supply chain changes in business models, inter-company transactions, and the physical flow of goods through new geographies may result in impact on customs and VAT requirements. However, they may also provide an opportunity to reevaluate transfer pricing and IP portfolio and capture the value of adjusted priorities in areas such as procurement and risk management.

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Accelerated digital transformation for tax-efficient supply chain planning

Acceleration of digital adoption due to COVID-19 is taking place throughout the end-to-end supply chain, with faster and broader adoption of data and predictive analytics, cognitive automation and artificial intelligence (AI), application and infrastructure platforms, digital reality, communication and sensor networks, robotics, digital supply networks, smart factories, and e-commerce. Your organization may look to you for tax guidance on digital initiatives impacting product development, manufacturing (such as digital twins), and distribution (such as demand sensing).

Tax, along with the rest of the business, will need to understand the broad scope of the impact of digital and how it reverberates through and drives supply chain decisions. For example, you may need to provide tax guidance on where to align new digital assets or how digital initiatives will impact existing IP structures. In addition, the business may be looking for advice on how changes such as expansion of e-commerce or a transition to a true omnichannel experience should be approached from a tax perspective.

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The role of tax-efficient supply chains in helping organizations respond, recover, and thrive

As COVID-19 drives significant changes in business strategy and accelerates digital adoption, tax should play a central role in supply chain decisions. Tax teams can be ready by staying informed, performing tax-efficient supply chain planning now, and establishing strong lines of communication with business decision-makers.

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