May 17, 2020

Top 5 Tax Efficient Outsourcing Locations

Outsourcing
Offshore
Supply Chain
Tax
Freddie Pierce
4 min
Who doesn’t like money? Supply Chain Digital takes a look at the Top 5 tax friendly outsourcing locations in the world
Before reading this feature, be sure to check this story and others in June's issue of our digital magazine. Trust us, it's way cooler! India h...

Before reading this feature, be sure to check this story and others in June's issue of our digital magazine. Trust us, it's way cooler!

India has always been atop the world in terms of outsourcing, but a corporate tax rate of 30 percent can scare away prospective outsourcers. We take a look at some of the world’s most tax-efficient outsourcing locations, each of which charge its outsourcers about half as much as India.

IRELAND

Maybe it’s the Emerald Isle’s rolling green hills that help save you the green. Among English-speaking countries, it doesn’t get any lower than Ireland’s 12.5 percent corporate tax. A country formerly known as predominantly agricultural transformed in the 1980s, offering bottom-of-the-barrel corporate taxing to lure foreign investors.

The risk paid off, as Ireland has lured big-time investors like Intel, Microsoft and Google, among several others. The low tax rate is coupled with a highly intelligent and able work force, making Ireland an offshore outsourcing haven. According to the U.S. Tax Journal Tax Notes, Ireland is the world’s most profitable country for U.S. corporations, especially in the software industry. According to offshoreIToutsourcing.com, “The Irish government has set up huge incentives to software companies to produce software on the island.”

When you factor in the nation’s storied breweries, it’s no wonder why so many businesses choose Ireland as an outsourcing location.

HONG KONG

Want free trade and a globalized marketplace to set up an offshore outsourcing project? Hong Kong’s the place for you. “The World’s Freest Economy” offers an extremely low corporate tax of 16.5 percent encourages outsourcing efforts, while the special administrative region taxed corporations 4 percent on new investments in 2010.

Your workers might also enjoy being based out of Hong Kong, as the country offers several incentives to keep its people happy. No sales tax, no capital gains tax and an extremely low income tax that doesn’t exceed 20 percent make Hong Kong a tax haven for your workers.

A bustling nightlife filled with some of the world’s best restaurants is a nice perk as well. So, what are you waiting for?

SINGAPORE

As the world’s fastest growing economy, Singapore’s large, cheap labor force has attracted offshore outsourcing efforts for years. According to guidemesingapore.com, “Effective tax rates as one of the lowest in the world and the general business friendliness of Singapore are the two important factors contributing to the economic growth.”

Another attractive part of outsourcing to Singapore has been the declining tax rates. Since 1997, corporate tax has gone down at least once every four years and now sits at 17 percent. That low tax combined with an encouragement of off outsourcing helped rank Singapore as the No. 1 overall outsourcing location in the world, according to Sourcingline.com (http://www.sourcingline.com/top-outsourcing-countries).

Singapore scored high in the cost competitive and business and economic environment indexes, and its low overall taxes help Singapore score high on our list of tax friendly outsourcing locations.

TAIWAN

In an effort to encourage more foreign investing (and offshore outsourcing), the Taiwanese government recently lowered the corporate tax rate for the second time in a 12-month period. The corporate tax went from 25 percent in 2009 to 20 percent last year to 17 percent, rivaling Hong Kong and equaling longtime tax haven Singapore.

It’s too early to tell how such a substantial lowering of corporate taxes will affect outsourcing, but it will definitely help in some way. For now, Taiwan remains an intriguing outsourcing option, offering low taxes and a capable workforce.

UKRAINE

Admit it, you’re surprised. Few people think of Ukraine as a tax-efficient outsourcing option, but after announcing that its corporate tax will be lowered to that of Singapore and Taiwan at 17 percent by 2014, it’s safe to say that Ukraine certainly has become a more attractive outsourcing location.

According to the annual review of IT outsourcing markets in 16 countries of Central and Eastern Europe, Ukraine ranked as the world’s fifth largest IT services provider, topping all its European rivals.

A lowering corporate tax, coupled with a growing educated workforce, should make Ukraine an outsourcing staple for the next several years.

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Jun 11, 2021

NTT DATA Services, Remodelling Supply Chains for Resilience

NTTDATA
supplychain
Supplychainriskmanagement
Procurement
6 min
Joey Dean, Managing Director of healthcare consulting at NTT DATA Services, shares remodelling strategies for more resilient supply chains

Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.

The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.

A Multi-Vendor Sourcing Approach

“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.

“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.

But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?

“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.

Wielding Big Tech for Better Outcomes

So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry

“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality. 

“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”

Evolving Procurement Models 

From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view. 

“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.

“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”

“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”

But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?

“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.

The Challenges

These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.

On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.

Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”

He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”

As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”

 

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