TaxMatters@EY - November 2013

Tax accounting: it all begins and ends with data

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Extract from Indirect Tax Briefing No. 8

This year, tax has made front page news around the world, and the tax affairs of popular household brands are being scrutinized, particularly with regard to the amount of corporate income taxes they pay. Even though tax authorities, company shareholders and heads of tax likely have differing views on this matter, they are likely to agree on one point, tax reporting requirements will only be more stringent going forward.

“Tax transparency” is how an organization adds clarity to how it communicates its approach to tax with its stakeholders. It is not a new concept, but until recently, tax transparency was generally considered a novel way of communicating with an organization’s stakeholders by going beyond the formal requirements. But recently things have started to change.

More companies are interested in providing goodquality information about their tax affairs not only to the tax authorities, but also to the wider stakeholder groups.

Data is the starting point and the end deliverable of every task. Managing data effectively is not only the key to tax transparency; it is also an imperative in our data-rich world. If companies do not seize the challenge to manage tax data effectively, tax authorities will.

Tax authorities are changing, too — becoming smarter, faster and more efficient at using data analytic tools to obtain, analyze and assess underpaid tax amounts. Reviews that once took anywhere from three months to two years to complete can now be done on a data-driven basis in a matter of weeks.

So far, too few companies are able to meet these challenges in their own tax data management and response times. Too often they are reactive, and data is analyzed and consolidated predominantly as and when the tax authorities perform tax audits. As companies begin to run their own data warehousing and dashboarding solutions, the analysis of tax data and the understanding of issues can become much more proactive. As they use these tools, the number of unpleasant tax surprises drops considerably. The response times to global tax authority queries fall and the processes are far more streamlined.

To learn more about data management tools and how dashboard solutions are helping companies drive tax data, read our Indirect Tax Briefing.