Through the combined pressures of global regulatory reforms, the rise of the digital marketplace, big data and a “do more with less” approach to profit margins, corporations have had to make significant changes to business processes and platforms. The tax function has not only been swept into this transformation, but, albeit somewhat reluctantly – found itself at the centre.
Change is unavoidable and requires tax departments to rethink technology and its role in the business’ overall strategic plan. Thomson Reuters’ 2018 European Tax Technology Survey revealed that tax functions without a digital strategist in their teams were feeling the strain.
Tax and Technology in Australia
Recently, I had the privilege to present at the CTA Convention in Sydney about the current state of play on the Australian tax technology stage.
The convention provided excellent opportunities to share and hear insights on the status and direction of digital for the corporate tax world, including the ATO on its digital tax strategy and its longer-term plans for proactive digital interaction with corporate taxpayers.
My key takeaways were:
- Corporates are acutely aware of the evolving tax regulatory and administrative framework surrounding their businesses domestically and internationally, and have therefore implemented tax solutions to address this (in part as a knee-jerk response).
- However, only a handful have a well-defined digital tax strategy and roadmap in place.
- Consequently, current adoption of tax technology is disparate, with some areas of tax adopting software solutions (particularly for indirect tax) and others with manual processes and a plethora (and ever-growing collection) of spreadsheets.
- Alarmingly, many tax functions do not currently have a holistic view (e.g. documentation and logical mapping) of the processes underpinning the delivery of their tax reporting obligations, creating significant risks including:
- Lack of a comprehensive tax audit trail
- “Tax key man” risk – where critical operational knowledge is lost due to staff turnover
- Task duplication
- Inefficient/ineffective work flow across the tax function being “under the radar”
- Increasingly likelihood of penalty imposition by tax authorities due to a range of factors, including a lack of sufficiently robust, on-demand corroborative data to support tax positions on issues under contention, and late lodgement of tax reports (such as returns and Country-By-Country reports).
- Yet most corporates have commenced a substantive “health check” of their tax functions (as part of broader finance transformation projects), and are already investigating a range of cutting edge solutions to address these operational gaps, potentially heralding a longer-term shift in the dynamics and roles within the tax function.
Digital roadmap for success
Based on the above, irrespective of where your organisation is currently at in this transformative journey, it might be useful to keep the following in mind:
- Define your end-game: Are you seeking to simply achieve efficiencies around the delivery of your tax compliance obligations? Or do you want to do more with your transactional data (e.g., business intelligence and data mining) flowing from indirect tax determination workflows as part of a broader transformation project?
- Know your process (map and document!): Ensure that you have full visibility over each component of your workflow, empowering you to identify redundant, repetitive and manual processes (e.g. data cleansing, manipulation, validation and mapping) for rationalisation and / or automation.
- Know what solutions are available: From bolt-on tax software suites (such as Thomson Reuters ONESOURCE), ERP customisations (e.g., integrated indirect tax determination engines) to intelligent automation solutions (as highlighted by my co-presenter, Michael Flanderka, Data Interactive), there are myriad options to choose from, and certainly no one-size fits all. Select the one which aligns with your circumstances (e.g., budget, risk appetite, ability to deliver).
- Take your team on the journey: Communicate, earn the buy-in and upskill tax team members most affected by these changes. Without their support, any transformative projects merely sit on foundations of sand.
There will be no stopping tax administrators, global markets, and technological-driven change. So, for corporate Australia, the message is clear – it’s time to join the digitisation bandwagon before it rolls on.
To find out more on how Thomson Reuters can help you to simplify and improve the robustness of your tax compliance processes through such solutions as ONESOURCE, contact us today.