The reality of digital disruption for tax is an opportunity for the enterprise
EY worked with a multinational agribusiness to build access and analytics capabilities that would collect, manage and transmit the tax-related data that the government required as well as provide visibility into what was being done with the data.
Through this process, the CFO identified new opportunities for using the data by expanding the company’s analytics capabilities, resulting in improved visibility into the supply chain. The company has been able to enhance its strategic planning around tax and beyond, both improving efficiency and enabling a more proactive approach to tax management.
An example highlights how rapidly these changes are happening and how CFOs can benefit from being more proactive. A recent EY survey, Do you define your CFO role? Or does it define you? The disruption of the CFO’s DNA, which details how digital is disrupting CFOs’ roles, identified four keys areas where CFOs need to focus their attention:
- The storm of available data
- A volatile risk environment
- Increased regulatory scrutiny
- A broader set of internal and external stakeholder demands
These real-world CFO issues only give more credence to the need for a comprehensive strategy that prepares CFOs to take the lead in leveraging data analytics for risk management, compliance and growth. Tax authorities the world over have embraced this evolution and are implementing it in varying stages. CFOs must grasp this reality and respond appropriately, proportionately and aggressively.
New obligations — and new opportunities
While companies have initially focused on digital strategies for product and customer innovations, the increased external stakeholder demands now include the rise of digital tax administrations. This growing reality takes digital strategies from growth plan to government mandate. These new digital demands present CFOs with untapped opportunities to lead the business and restructure their organization with an eye toward new processes to capture and use data.
CFOs will be able to harness data analytics to gain a more holistic view of their organization’s resources, taxes and other financials in real or near-real time. This data-driven perspective will allow CFOs to plan, address, prevent and react from a more knowledgeable position, and could result in:
- Elimination of tax overpayments and penalties
- Avoidance of blindside data requests
- Increased accuracy in sales, supply chain and HR data reporting
Looking beyond tax compliance
Ignoring disruption and simply using a traditional tax-compliance response model leaves organizations reacting to mitigate risks. It opens them up to fines, increased exposure and higher operating costs for compliance. And adding to this current complexity are the future exponential data demands that companies will face as more and more countries transition to digital tax administration.
Transforming awareness into action
A majority of CFOs already recognize the gap between where they are in terms of data analytics and where they need to be. A large proportion of these finance leaders say that they need to build their understanding around digital technologies, but aren’t sure how. For those leaders dealing with digital tax administrations, here’s how to begin now:
- Assess: Acquire a clear understanding of where you currently stand. What types of data are you sending and to which governments?
- Manage: How is your data submitted? By whom? Often this data spans across the enterprise into such areas as sales, supply chain and HR.
- Analyze: Have you identified and addressed any potential risk areas that would be flagged by tax authorities? Look at your data through a similar lens as that used by tax authorities.
- Implement: Put systems in place that can streamline and, where appropriate, automate steps 1 to 3.
- Expand: Use insights gained from data analytics to better optimize systems and make more strategic business decisions.