Corporate tax is a complex issue for most companies which for a long time hasn’t been at the forefront of thinking. But as more markets open up due to advances in eCommerce, the need for dedicated tax software to help make real-time tax decisions is more vital than ever.
So where does tax sit, particularly when it comes to planning? What type of access to information do you need? How simple should we make tax reporting? These are the questions most companies struggle with.
The answer is having a tax strategy with dedicated tax technology. It gives a business a competitive edge in the market, and the ability to stay on top of tax compliance, maximise business opportunities, and ultimately increase profitability.
“The challenges of managing tax compliance and reporting obligations, especially globally, have a direct impact on business strategy,” Ben Scull, KPMG Tax Technology Director, says.
“The sales footprint, supply chain and available technology from a tax perspective is now paramount as to where and how businesses are growing. Tax is not the only driving force behind business strategy but it has become more relevant and, increasingly, an enabler of business strategy.”
Tax strategy plays an increasingly important role in helping business leaders make decisions. Not only are they able to gather historical information that often show trends in buyer behaviour or price sensitivity, but they can also put together comprehensive intelligence from detailed analysis that incorporates real-time data.
Getting buy-in is vital
By far the biggest issues facing many accounting firms is getting buy-in from the IT department, which have grown substantially over time.
Whereas in the past IT was outsourced, now they have become an integral part of all businesses around the world.
“In order to transform the tax function from an efficiency and risk perspective, more awareness and understanding is required from IT to ensure the requirements of tax are being met,” Scull says.
“The board has become a much greater stakeholder of late, and accurate and timely disclosures of the company’s tax position is fundamental for them to make business decisions. Additional reporting and insights into tax has become an additional piece of work with no corresponding reduction elsewhere.”
On top of that, internal and external communication is crucial to the role of the tax team and having access to the right information is essential for tax compliance reporting.
Having the right data
Business data can be proactive due to the advent of tax technology and the smooth flow of information both internally and between clients. Executive management need to make fast and comprehensive decisions based on accurate information.
Those decisions also have tax implications. Not only will it immediately affect revenue spend, but future profitability, asset evaluation, tax outlay and ultimately income availability.
But there are still some issues with reporting systems.
“Due to the technology available to produce, interpret and report on data this has meant that the tax function has had to become adept at utilising a variety of solutions,” Scull says.
“Both structured and unstructured data is now required to be available in formats that can be easily reviewed, audited and reported on to various stakeholders. Data is most commonly extracted from an ERP where tax is not the key beneficiary of these systems.
“Therefore, an increasing challenge is how does tax utilise this data and ensure that the tax function owns the tax treatment of transactions passing through these systems? Too often non-tax people are making tax decisions that ultimately impacts the quality and the accuracy of data available for reporting and compliance.”
The right tax technology is helping provide the answers.
“In order to provide important insights into the tax data we are seeing clients look at the upstream treatment of their transactions,” Scull says. “They now need to utilise ‘tax engine’ technology to perform real-time tax determination and ensure accuracy of the data that is passing through the ERP.”
Ensuring the right tax solutions are in place, as well as providing the right training, are crucial to allowing an organisation to function cohesively.
Linking the tax software, if possible, with external clients, can also enable quicker decisions.
“Accountants use a variety of accounting systems, both bespoke and off-the-shelf products, and there is no panacea for the demands placed on tax teams to extract, report and analyse data,” Paul Suppree, Assistant Director, Corporate Tax Association, says.
“Our recent member survey shows given limited human resources available, solutions to such demands are increasingly systems based, with many now dipping their toes into robotic process automation or upstream solutions.
“Most generally use externally supplied tax software for return preparation, country-by-country reporting and the like. Excel is also still used to manipulate data but in very bespoke situations.”
Secure tax solutions needed
As the digital transformation spreads and tax reporting becomes almost exclusively online, both in Australia and globally, the need to have safe and secure systems will be paramount to an organisation’s success.
“Upstream data management — along with bringing the decision-making for tax back into the tax function — is the only way to take full advantage of the digital age,” Scull says.
“This includes repurposing data to different stakeholders, understanding the impact of tax on your business decisions and ensuring that the tax function can keep up with the transformations across front office functions.
“For example, the tax function cannot go from being technology adverse to suddenly wanting to utilise Artificial Intelligence or automation or even blockchain unless they are willing to invest now and ensure they are staying relevant.
“You may not feel that change is important right now, but you need to be aware that internal and external factors are pushing you towards that digital journey. Done properly, it will improve what you do. It is not hard to take that first step, and you will enjoy the change in what your role can become.”
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