Tax Component Calculation - Xero should be calculating the sum of each tax component rounded for each line item.
Xero calculates tax per line based on the total tax value of all components then rounds this figure. It is later split between tax components.
Xero should be calculating the sum of each tax component rounded for each line item.
Image attached shows how Xero calculates a different value for two equal tax components due to this simplistic method it is using to calculate tax. What is the point in having the ability to set multiple tax components if this is not taken into consideration when calculating the total tax value per item.
2 tax rates, both set at 9% but giving me differing values on the invoice, making this an invalid invoice.
Tim Thomas
shared this idea
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Bonny Amemiya
commented
I too am disappointed to find that the tax calculations on invoices are incorrect due to rounding, and as Tim has shared, makes the invoice invalid. Xero's tax calculations must be accurate.
Xero currently calculates the tax on each line item, rounded to 2 decimal places, then sums the tax at the bottom by tax component. If an invoice has multiple line items, this rounding approach results in incorrect total tax amounts.
The best solution is fairly straightforward. Sum the line item values by tax component first, then apply the appropriate tax rate for an accurate tax calculation.
An alternate solution - if Xero must calculate the tax for each line item first, then round the line item tax to at least 4 decimal places, then sum the line taxes by category, rounded to 2 decimal places. The user should at least have the option of rounding tax calculations to 4 decimal places for accuracy.
Accuracy, especially with customer invoices, should be a top priority for Xero.