Turning VAT Challenges Into a Competitive Advantage
Global retailers face constant whiplash as countries adjust their value-added tax (VAT) regulations, complicating cross-border operations. Recent updates — including zero-dollar VAT thresholds in Indonesia and the Philippines and revisions to the European Union’s Import One-Stop Shop (IOSS) — demand urgent attention.
These unpredictable changes create more than administrative burdens. When customers encounter unexpected VAT charges at delivery, they often reject shipments outright, leading to costly returns, damaged trust and diminished loyalty. Retailers that fail to proactively address VAT shifts risk losing customers to better prepared competitors.
Yet amid this turbulence, retailers can adopt clear strategies to stay ahead. Here are four ways to eliminate friction for customers while ensuring compliance with international regulations:
1. Prioritize VAT registration in key global markets.
If you’re serious about competing internationally, you can’t afford to wait for VAT rules to catch you off guard. Registering for VAT programs, like the IOSS, allows you to pay taxes upfront, sparing customers from unexpected fees upon delivery.
Consumers hate surprises — especially ones that hit their wallets — and unhappy customers don’t stick around. By absorbing VAT costs early, you eliminate friction from the purchasing experience, strengthen loyalty, and protect your brand from costly returns and negative reviews.
2. Prioritize accurate product descriptions and HS codes.
Retailers often underestimate the impact of precise product descriptions and accurate harmonized system (HS) codes. Vague or generic descriptions invite higher VAT rates and customs duties based on broad tariff codes assigned by destination customs.
Detailed descriptions ensure proper classification and can substantially lower duty costs. For example, labeling a product simply as a "dress" could result in higher duties compared to describing it as an "organic cotton dress made from recycled materials."
Although detailing product attributes may seem labor-intensive, the financial return — through reduced duties, lower shipping costs and enhanced consumer satisfaction — is considerable. Collaborating with logistics providers experienced in classification can further streamline and optimize this practice.
3. Optimize fulfillment strategies for cross-border efficiency.
With VAT complexities mounting, fulfillment strategies have never mattered more. Bringing distribution centers closer to international customers — particularly in the EU or United Kingdom — can significantly cut shipping costs and reduce delivery times, providing a smoother customer experience.
You won’t completely avoid VAT, but strategic fulfillment placement greatly reduces cross-border logistics challenges and limits surprise fees for customers. This investment strengthens customer relationships by ensuring they know exactly what they're paying and when their order will arrive.
4. Adopt sustainable packaging to align with international expectations.
Sustainability is increasingly important to international consumers, particularly in Europe. Retailers are being evaluated not just on their products but also on packaging practices. Transitioning to eco-friendly, recyclable or biodegradable packaging reduces shipping costs and VAT exposure by minimizing package size and weight.
Retailers that use unnecessarily large boxes pay to ship air — inflating logistics costs and hurting brand perception. Adopting smaller, sustainable packaging can enhance brand loyalty, especially in environmentally conscious markets like the United Kingdom and Germany, where consumers actively seek brands committed to sustainability.
The challenge of VAT management goes deeper than simply following rules. Many retailers still treat VAT as an afterthought — a necessary hurdle handled by finance departments after strategic decisions are made. This mindset overlooks the reality that tax considerations directly impact pricing strategies, market entry decisions, and customer experience.
Smart retailers are already integrating VAT expertise into cross-functional teams, bringing tax specialists into early-stage planning for new markets and product lines. The true differentiator is an organizational mindset that sees VAT not as a compliance task, but as an essential part of delivering frictionless customer experiences across borders.
Deb Deakin is director of operations at ePost Global, where she leads cross-border shipping operations across four U.S. facilities.
Deb Deakin is Director of Operations at ePost Global, where she leads cross-border shipping operations across four U.S. facilities. With more than 20 years of experience in international logistics — including leadership roles at Swiss Post and Asendia — Deb specializes in building efficient, scalable systems and teams. She’s passionate about process improvement, automation, and mentoring the next generation of logistics leaders.
