3 minute read 25 Apr 2018
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How tax and finance departments can deliver value in the digital era

By

EY Global

Multidisciplinary professional services organization

3 minute read 25 Apr 2018

Under greater scrutiny from tax authorities, the tax function must be confident that data is accurate, secure and “audit ready.”

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 challenge

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.

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.

Adding to the challenge, the requested information may be spread across different functions and geographic locations. This can make it hard to find data when it’s needed and know when that data has been collected or delivered. These challenges can be mitigated through development of a robust data management and analytics system.

Further, they must take proactive steps to create files that are “audit ready” when submitting requested information to tax authorities — particularly in this environment of increased transparency and information exchange.

What to do

The tax department has an opportunity to deliver value and mitigate risk in this new era of digital tax by embracing enterprise initiatives and transformations that facilitate enhanced data management. Companies can realize this value by harnessing data analytics to manage risk, control costs, and inform communications and business decisions.

We see forward-looking companies taking the following steps:

  • Performing detailed reviews of data requirements, processes and technologies that support digital tax authority requests across the globe.
  • Testing and reviewing submitted data to provide the company with visibility into what tax authorities are doing with the transmitted data — quantifying and mitigating risks as issues are found.
  • Developing multi-country data management and analytic capabilities to create efficiencies and provide real-time visibility into the transmitted data.
  • Shifting focus from traditional compliance activities to real-time digital audit readiness activities — changing technologies, processes and people to support this shift.
  • Keeping up to date on legislative and regulatory changes affecting tax data collection and submission — and providing input to policymakers as appropriate.

Summary

Companies must keep their tax-related digital processes current – and staff well-trained – or face compliance and audit risks.

About this article

By

EY Global

Multidisciplinary professional services organization