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How to improve performance and deliver value through tax

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The difficulty of tax reporting is only increasing with more demands than ever being made by the Australian Taxation Office. So using the right software can not only give you a distinct advantage, but a must.

There are many challenges ahead in the world of taxation for companies in Australia and around the world.

The increasing financial pressure the Commonwealth Government faces coping with an aged workforce, declining revenue from mining royalties, and slowish economic growth around the world, increases pressures to drive up revenues.

This is normally achieved through two avenues: increasing existing taxes or introducing new ones.

Furthermore, in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, there will undoubtedly be more regulation changes and greater scrutiny upon Australian companies.

Now, more than ever before, businesses need to not only be tax compliant, but proactive in the need to improve accountability and transparency.

“It is all about doing more with less and moving away from a compliance to an analyst/advisory focus for the tax team,” Paul Suppree, Assistant Director, Corporate Tax Association, says. “More members are saying the skill sets they want are people with system based, data analytic and advisory skills. This is much broader than the historic focus on tax technical skills or producing a nice-looking tax return.

“The Australian Tax Office’s (ATO) compliance initiatives such as justified trust and a focus on systems and governance are changing the way tax managers are operating. They are more risk managers with a tax specialty than a tax manager with an understanding of risk. It’s managing all stakeholder relationships that’s key.”

The Corporate Tax Association represents the top 125 corporates in the country by size — about 75% are Australian publicly listed groups with the balance being foreign owned, government owned or private groups. They account for an estimated 60% of all income tax paid by companies with turnover greater than $200 million.

Working with the ATO
Suppree sees the increased use of software systems by the ATO and other regulatory bodies will force Australian companies to be more open and diligent with their financial reporting.

Australian businesses will need up-to-date software, with reliable IT systems and sound internal controls to ensure they stay ahead of any pressing taxation issues.

“We know the ATO have a huge focus on digitisation, as are many tax authorities around the world,” Suppree says. “We’ll eventually see more pre-population of data by the tax office and other agencies for corporates, as happens with individuals.

“I can see the ATO in the future saying, ‘if you use X product for tax compliance and configure your systems correctly, the ATO will leave you alone’, particularly for high volume transactional taxes such as GST. That’s a brave new world.”

The complex world of global reporting
International reporting too, will become complex, rigid and accountable. Governments have already started working together to claw more tax back.

“With the proliferation of global business reporting obligations such as country-by-country reporting, and BEPS action plans for example, authorities are increasingly demanding transparency in relation to global taxation,” David Rumble, RSM Australia, Principal (Tax Services) says.

“Information sharing between tax authorities will become the norm, providing them with a greater ability to mine data and conduct multi-jurisdictional audits.

“In is likely that this increase in global scrutiny will place both internal and external pressure on clients to continuously monitor their tax decisions, thus resulting in greater strategic focus being placed on cross-jurisdictional reporting as well as the documentation of business activities to ensure any increased risk that may result from these transparency initiatives is understood.”

There seems no respite from an increasing demand by governments around the world to make companies who expand globally to pay their fare share of tax. This will require greater co-operation and co-ordination of tax transparency in order for governments to be able to accurately evaluate the need to access and charge appropriate taxes.

“Tax has always been complex and the external challenges presented by globalisation, changing tax laws and similar are expected to remain,” Stephen Coakley, Deloitte Tax Management Consulting Partner, says.

“However, we see a whole new set of challenges that heads of tax and their teams now need to meet in an unprecedented environment of digital innovation and disruption. Fundamentally, the rate of technology change is fast becoming exponential and therefore the ability of tax functions to keep up is expected to become more and more problematic unless some action is not taken now on digital strategy.”

What’s the future look like?
Managing tax is also a way of helping improve business accountability and ultimately reduce costs. By being able to plan in advance using real-time data, enables a company to forecast potential revenue increases and decreases.

It can also identify which areas of the business are performing and which are not. A lot of the business intelligence, however, is reliant on the right data being inputted and analysed correctly, in order to make sensible and accurate decisions.

“Digital innovation is demystifying business functions like tax and that is a good thing,” Coakley says. “The ability to explain complex matters using better visualisation tools means more people in the business, including the C-suite, should have a better understanding of the tax function and the value it delivers.

“The ability to engage with front offices through digital collaboration tools will bring the tax function closer to the action in real time. The opportunity to provide better insights from data sets used by tax will open the eyes of business stakeholders to new, previously unseen insights that tax people can bring.

“This increased transparency presents an opportunity for tax to reconsider its value proposition to the business in a digital world. Tax can embrace change, be proactive and take control of its own destiny. Digital innovation is therefore a critical enabler for tax to do things differently. Perhaps too it is similarly an enabler for tax to do different and more valuable things?”

Death and tax have always been a given. But add technology to that mix, and the equation looks a little bit different.

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