Global businesses have named the UK the most 'VAT-friendly' country, and they have predicted that the Government's reliance on indirect taxes will greatly increase in the near-future.
In a survey commissioned by KPMG, multinational companies said they considered VAT errors to now be a greater risk than mistakes in corporate tax.
The UK's approach to dealing with VAT errors was credited by Gary Harley, KPMG's head of indirect tax, as the leading factor for the country's success.
However, he warned of changes under the HMRC's new penalty regime because the department 'seems to be adopting a harsher approach whereby it will levy a penalty unless the taxpayer can demonstrate that they acted with reasonable care'.
'Given the likelihood of increased penalties in the UK and the global concerns over VAT compliance,' said Mr Harley, 'minimizing the risk of VAT errors needs to be a priority for British businesses.'
The study, which quizzed senior finance professionals at more than 500 large corporations in 22 countries around the world, proves 'that indirect tax is becoming increasingly important for global businesses as corporate tax rates decline', claimed Niall Campbell, KPMG's global head of indirect tax.
He added: 'The levels of VAT which global businesses are now handling are quite staggering and are clearly causing finance directors and tax directors real concern.
'As the cost of getting VAT wrong is so material, it makes sense that errors in VAT compliance have now been identified as the biggest tax risk for these businesses - quite a shift in attitudes away from the traditional focus on corporate and income taxes.'
Within the UK, 70% of respondents forecast that the Government's reliance on indirect taxation would increase in the next five years.
This is not surprising, remarked Gary Harley, 'given both the efforts that HMRC have gone to in recent years to combat missing trader fraud, through a combination of legislative change and high profile litigation both here and in Europe, and the need to maintain the tax yield at a time of uncertain economic outlook and an increasingly uncompetitive tax environment.'