The global e-commerce market is projected to reach a staggering $8.1 trillion by 2025, with online trade increasingly becoming the preferred way to shop over traditional high-street spending. Online marketplaces account for 60% of e-commerce shopping and have influenced traditional companies to expand their international reach.
Despite opportunities for growth, providing a seamless e-commerce experience brings a number of indirect tax challenges, particularly when it comes to cross-border trading, and this is a key issue that must be addressed. So, what can be done to solve the confusing cross-border marketplace conundrum?
Online Sellers Are Going Global
We surveyed 479 global finance professionals, split between marketplace operators and sellers. The research found that online sellers are increasingly prioritising selling in new territories to reach a global customer base and expand their online presence in other territories. Following in the footsteps of e-commerce giants like eBay and Amazon, the ability to facilitate cross-border transactions is an attractive prospect for marketplace operators.
With marketplace sellers reporting a revenue increase of around 23% over the last 12 months, operating across an average of 40 countries, is a clear indication that the e-commerce market is expanding at a rapid pace. From commodities like digital services including software and games, to clothing and fashion items, online marketplaces are continuing to dominate the e-commerce spending realm. But, this influx of digital trade brings a whole host of issues for sellers and marketplace operators alike.
The boom in global digital trade presents challenges for sellers and marketplace operators, including concerns about indirect tax, brand recognition and supply chain complexities. Global trade can be, in a word, troublesome.
89% of survey respondents stated that they found it challenging to manage the numerous indirect tax rules, especially when it comes to expanding into new countries. What this highlights is that keeping track of the myriad of confusing rules and regulations is putting increased pressure and complications to their ability to achieve their growth ambitions. Similarly, 74% said that they were experiencing difficulties with trading abroad as well as struggling to manage the added complexity in tandem with managing the other aspects of their business.
What Can Be Done To Solve The Cross-border Conundrum?
For marketplaces to provide a more seamless experience for their sellers, improving the automation in their core finance and tax functions is crucial to enable sellers to trade globally with ease. As more sellers will turn to online marketplaces to expand their business into new regions and territories, investing in an integrated indirect tax engine is a strong solution to resolve the challenges associated with indirect taxes in this space.
When your business incorporates an end-to-end tax management solution, every step of the transaction is smooth, easy and worry-free – for businesses, sellers and customers alike. By using a tax engine to streamline the process, businesses have the capacity to grow and realise their potential.
To learn more about Vertex’s VAT solutions, and how they can help your online marketplace get in touch by using this link.
Please remember that Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.