Release date: May 17, 2010
Guest: Paresh Shah
Running time: 8:34 minutes
Sales tax recovery reviews can bring much needed cash to most types of businesses. In this episode, Paresh Shah discusses the important aspects and benefits of a sales tax recovery review, how to identify when you need one and the kinds of businesses that will benefit the most from these reviews. He also discusses the recovery review process and the approach companies should take when hiring a service provider.
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You’re listening to another episode of PwC’s Tax Tracks at pwc.com/ca/taxtracks. This series looks at the most pressing technical and management issues affecting today’s busiest tax directors.
Gerry Lewandowski: Here with us today is Paresh Shah, a senior member of PwC’s sales tax practice based in Toronto and the national leader of PwC Canada’s sales tax recovery teams. Paresh has been with PwC for a number of years and has worked with many Canadian and US businesses in delivering the benefits of a sales tax recovery review. Paresh is with us today to share his experiences and outline for you the important aspects and benefits of sales tax recovery reviews including helping you to identify whether you may need one.
Thanks for joining us today Paresh.
Paresh: Thank you, Gerry. It’s a pleasure to be here.
Gerry: Paresh, I guess the most basic question first…what is a sales tax recovery review?
Paresh: Sure, Gerry, that’s a great place to start.
A sales tax recovery review is a process used to identify transactions where taxes were either not accurately claimed back or paid in error. Our particular process utilizes software to analyze our clients' disbursement data and that allows our dedicated team of senior professionals to investigate potential recovery opportunities.
Sales tax reviews are actually completed globally in almost all counties that levy a sales or value added tax. For example, in the United States these types of reviews are referred to as reverse audits.
In Canada, our reviews focus on the federal goods and services tax and provincial sales taxes. The scope of our reviews can also be expanded to include custom duties, payroll taxes and duplicate payments. And as an added benefit, the data used to complete a sales tax recovery review can also be used for our direct tax reviews.
Gerry: Which type of businesses are most likely to benefit the most from a sales tax recovery review?
Paresh: Well, really all businesses can benefit from our recovery reviews. Our clients range from those in the IT sector to health care to financial institutions.
Organisations undertake recovery reviews for a variety of reasons. Some view the process as simply and cost effective way to recovery taxes that would otherwise go unrecovered due to resource constraints. Others include recovery reviews as part of their governance procedures, to be completed every few years.
In our experience, organizations where a person, let’s say, has recently taken the responsibility for sales taxes duties or where accounts payable processing is completed within a shared services centre outside of Canada. Those companies look to our reviews to provide a better understanding of how sales taxes are managed within their organisation.
Gerry: Tell me about the recovery review process in general? How long does it typically take and how much of the client’s staff time will be needed?
Paresh: Our recovery review process can be divided into four phases. Phase one is where we acquire the electronic data from our clients. Our IT senior manager is involved with all data extractions and provides specific step-by-step instructions specific to our client’s financial system and database.
Phases two and three involve the quantification and verification of potential opportunities that we have identified both through the data and our understanding of our clients’ organisation and industry. Because we work closely with our indirect tax consulting specialists, the technical expertise that we demonstrate though our advice and thought leadership can be seen in our recovery review work.
Now phase four completes the entire process with a final report and training session. Our refund claims are documented to audit level standard and enjoy a very high approval rating from tax authorities. As part of our engagement, we handle all post-filing queries from tax authorities or suppliers, should they arise.
So from start to finish, our review can take a few weeks to few months. Now, much of this will depend on our client’s schedule as we make a point of not standing at your office door demanding information based on our schedule. We understand that although these types of engagements is important, our clients have other responsibilities that will take priority over the course of a review.
Gerry: Paresh, I understand that there are a few “boutique” sales tax recovery operations out there. What is your experience with these operations and how do they compare with the services provided by a firm such as PwC?
Paresh: Well, we differ from boutiques in a number of ways but fundamentally it comes down to how we provide our service. The members of our indirect tax recovery review team are employees of PwC and are not compensated based on recoveries. We’re motivated by client service and technical expertise. Our job is to put ourselves in our client’s shoes when delivering a recovery review; and you can see that in the way we conduct our reviews. For example, when a client decides to not to move forward with a particular recovery issue that we have identified due to a potential significant compliance issue that we also uncovered during the review, we respect and understand that decision.
You know, clients also tell us that they are often drawn to boutiques because of their post-review hotline services. In our opinion, tax advice should be delivered by professionals that understand your business and that can be held accountable for any advice given, no matter how minor the issue may first appear.
For all of our review clients, post-review questions are handled by one of the recovery review team members, often myself, who will be familiar with our clients’ operations as a result of the review. We think our clients are better serviced under this structure as opposed to a limited time, generic hotline.
Gerry: Other than the cash recoveries that I could realize from a sales tax recovery review, what other benefits may I expect to see from this process?
Paresh: Well, recoveries of unclaimed taxes are great, compliance issues are actually what are of higher importance to most of our clients. Most reviews will inform you of compliance issues as noted during the course of the review. We’ve taken it one step further. As part of our recovery review engagement, we complete a compliance review independent from our recovery review procedures. You know, I think our clients appreciate this comprehensive approach and the fact that we recognize that it’s not always about the recoveries.
And, in addition, when we complete our reviews, our goal is not really to engage the client for the next review in two years. Our goal is to educate our clients and provide realistic process improvement solutions that can be implemented to address the issues that resulted in the recoveries.
Gerry: So if someone is interested in carrying out a sales tax recovery review for their business what should they do?
Paresh: It’s important that you choose a service provider that meets your needs, so I’d say the first step is really to make sure you understand what those needs are and to recognize that not all recovery reviews are equal.
If you are looking for a comprehensive review that aims to identify more than just “low hanging fruit” and that’s executed by senior professionals that put client service as their number one priority, I believe our indirect tax recovery review will meet your expectations.
Gerry: Thank you very much for sharing this information with us Paresh. For additional PwC sales tax information, visit pwc.com/ca/indirecttax.
Thank you for tuning into Tax Tracks at www.pwc.com/ca/taxtracks.
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Through interviews with prominent PwC tax subject matter professionals, Tax Tracks is an audio podcast series that is designed to bring succinct commentary on tax technical, policy and administrative issues that provides busy tax directors information they require.