Amid increasing demands for transparency, many tax authorities are building sophisticated data-gathering platforms that enable matching and sharing of taxpayer data. Now, an unprecedented amount of information is flowing between governments and businesses, and that data is being analyzed and used in new and more expansive ways.
With a new level of scrutiny, companies — and especially their tax and finance functions —need to know what information they are expected to share and have confidence that it is accurate, secure and formatted correctly. Data is the foundation upon which this new digital tax world is being built, and the quality of the outcomes that result will depend on the quality of the data that goes in.
The Organisation for Economic Co-operation and Development’s country-by-country reporting (CbCR) requirements mandate increased data collection and disclosure. With several countries, including the United States, having adopted the CbCR requirements and many more countries soon to follow, the volume and pace of data collection and analysis will only continue to grow.
Many tax authorities pull together data from a variety of sources to develop a more complete picture of companies’ tax profiles. Companies are increasingly being asked to submit client invoices, statements of accounts, customs declarations, vendor invoices and bank records, all in formats specified by the government — and on an accelerated schedule.
Moreover, the formats in which these data are submitted may differ from how companies track and collect the data.
Tax authorities are using data analytics engines to validate invoices and log discrepancies, verify sales and purchase declarations, verify payroll and withholding declarations and compare data across jurisdictions and taxpayers.
What it means for companies
To match what governments are doing and stay one step ahead, companies must look at the tax function through the lens of big data and data analytics and rethink how they collect, store and analyze data. Documents may be stored in various places, such as network shared drives, personal hard drives, external providers’ systems, document management systems and emails.