Supply chains are becoming important parts of businesses as global companies seek to expand in this ever-changing and competitive world. The technological progress allows the designing, manufacturing, and delivering of new goods and services in improved ways. The change is fast and difficult to avoid given that new markets are emerging and forcing the old ones to reshape to meet the market demands. Supply chains integrate the movement of goods from traders to consumers.
It is a scheme made of individuals, properties, firms, information, and events. There are various taxes imposed on the sale, production, and international trade of commodities. These include VAT and GST, excise, and customs duties as well as environmental taxes (Webber, 2011). There are also tax incentives that various countries and regions offer to encourage business in their areas.
As supply chains continue to grow, effective management of taxes starts being required. The business planners should understand the impacts of tariffs on the supply chain. For tax strategies to work, they should be managed and planned to meet the strategic agenda. Businesses should plan and concur with the changing tax rates given that the future is likely to change. Companies should pay all taxes due at the right time while reclaiming any refunds.
The strategy enables the company to avoid controversies involving tax and deal with it fast and efficiently (Banker, 2009). The policy gives the company a competitive advantage in the future. Businesses are always the beneficiaries of various grants and incentives that aim at encouraging the user of greener and cleaner technologies, industries, and activities. Failure to adhere to the regional tax laws can lead to business disturbances, including disruptions, fines, and delays.
When selecting a location to set up a company, tax rates are usually the main determinants. These tax incentives include the addition of value, disbursement of levies, properties excise grants and revenues. Thus, the main determinants of any manufacturing site are domestic and local tariff policies. Besides, tax strategies may attract or distract other firms and industries from investing in an area.
Tax incentives also change rapidly making a supply chain flexible enough to adapt to the changes. For example, in China, such rapid change became a problem when its transport infrastructure could not handle the increased capacity of the supply chain activities (Banker, 2009).
Local and regional property taxes establish the value of the facilities and offices used by the businesses. For example, the areas with lower property taxes will accumulate more warehouses. Yet, in this aspect logistics plays an important role.
Value-added is one of the most sensitive resources for the businesses, this way the areas with lower value-added taxes are likely to be entered by the majority of manufacturers. Various countries employ value-added tax strategies to attract production to their territories.
In conclusion, property, value-added, inventory, and income taxes are some of the most significant factors influencing the revenues of businesses, their placement, and logistics, which shape the supply chain. When it comes to inventory taxes, the businesses are to value the inventory they employ first. The rules and methods for valuing the inventory differ from one company to another. This way, certain tax strategies of the areas would influence the kind of businesses using them to expand their supply chain.
Finally, income tax may impact the whole supply chain management. This way, calculation of the revenue without the influence of taxation can make an area unsuitable for business placement, yet profitable income tax strategy would turn the area into a suitable one right after the consideration of tax rates.
Thus, to maintain the level of production and distribution standards, regional and local tax strategies are designed in such a way that they hardly cause imbalances in the supply chain. Countries tend to lower tax rates on properties, revenues generated, and inventory to attract investors and maintain the required level of value addition.
Banker, S. (2009). The tax efficient supply chain. Supply Chain Management Review, 44-49.
Webber, S. (2011). The tax-efficient supply chain: Considerations for multinationals. Tax Note International, 61(2), 141-168.