Increase operational efficiencies and leverage potential savings through intelligent automation and offshoring.
Intelligent automation continues to provide opportunities for businesses to thrive in today’s competitive market, and Robotic Process Automation (RPA) adds another advantage with software robots (“bots”). Bots provide an efficient, productive, and cost-effective alternative to workforce expansion, outsourcing or offshoring, and depending on how an organization deploys them, there may be additional tax savings related to the introduction of bots in an organization.
Current studies show that the use of intelligent automation in procurement departments trend to have a market value of $152 billion by 2020 with the potential to produce a ROI of 600-800%. Furthermore, the opportunities to increase the use of RPA is expected to expand to meet about half of current procurement functions.
As organizations look to integrate bots into its operations, the following productivity and tax implications should be considered:
Bots provide a wealth of opportunity for savings. They increase productivity by functioning round the clock on a 365-day schedule, increase consistency, and are quickly scalable to accommodate fluctuating workloads. They also do not accrue significant indirect costs. Furthermore, the organization’s human talent is freed up to innovate and create, with the bots handling mundane and repetitive tasks.
Bots can also be deployed in a more tax-efficient manner. Organizations can potentially generate additional savings, depending upon where it acquires, develops, and deploys their bots. Profits attributed to the bots could be generated in a jurisdiction with lower effective tax rates through offshoring. Though the amount of profit generated is often limited and based off the reduction in costs of performing the function, the savings can increase as RPA is combined with other high-value functions, such as predictive analysis.
But significant planning is required amidst a complex tax landscape and recent reforms. With the new global intangible low-taxed income (GILTI) U.S. income tax provision, which could impose U.S. taxes on foreign earnings; the value-added tax (VAT), which is imposed upon the provision of goods and service in many jurisdictions; U.S. withholding taxes; and foreign income and indirect taxes—organizations need to be aware of potential risks and develop a plan to help address each concern. Also, organizations should keep in mind the potential for a new tax on digital labor, stemming from the belief that bots create higher unemployment rates and depress wages.
When combined with offshoring, RPA can enhance companies’ productivity and create year-over-year savings. KPMG’s knowledgeable professionals have already helped companies to implement bots across multiple markets and sectors. From enhancing a global procurement model with basic bots to combining human and bot functions at a global procurement hub in locations with lower effective tax rate—KPMG helps companies envision tomorrow’s workforce and start creating it today.
Learn how RPA can help your company’s operational functions with potential tax benefits from offshoring here.