The digital transformation of tax is driving much behavioural change for organisations who understand the benefits but who face challenges in adoption.
The times may be changing, but one thing is still true, ‘nothing is certain, except death and taxes,’ to paraphrase Benjamin Franklin.
Tax is something that everyone faces, from income taxes to the VAT they incur on consumables every day to corporate filing obligations. Today, the tax function is under pressure to react to regulatory change and the digitisation of the tax authorities.
The issue that’s forcing the agenda is that governments and tax authorities are now using data to get better insights about their tax take or tax risk. They realise that following the data is akin to following the money which they’ve always been very good at. Businesses now need the same insight before they can actually file that position in their tax returns.
There is an element of organisations being forced to change but there is also an element of them wanting to be more efficient.
The recent National Analytics Maturity Study reveals that 78% of companies see analytics having a real impact in business strategy and 69% will increase spending on analytics. The number one challenge for companies is moving from insight to action.
In many cases, business leaders have to force the technology agenda through their tax functions. Traditionally, tax people haven’t had to think about changing systems. It’s the possibility of big savings and increased business insight from data analytics and emerging technology that’s really changing the conversation.
According to the National Analytics Maturity Study, 79% of organisations reported difficulty in recruiting analytics staff and that rising salaries is a key concern.
As well as recruiting analytics experts, organisations should look within and start reskilling and upskilling the talent they already have.
The engineering, management, analysis and visualisation of data is all helping companies see patterns and make more informed decisions.
Everything starts with data, it’s the oil that’s fuelling all the recent developments in technology and innovation.
Data will soon flow directly from the client’s ERP systems straight into the tax authority’s system. Ultimately, they’re the collection agency for the government and want be as efficient as possible.
Follow the money
Tax functions within large corporates are not generally the owners of data, they are the users of data. That data generally has to come a long way before it’s in a format that’s usable for the tax people to make the filings or payment they need. Often that’s quite a complicated process.
Every company has a unique challenge in terms of how they extract data from their ERP system and use it as a basis to file their tax returns or estimate their tax payments. Traditionally, tax people train as accountants first, they’re not IT or data people.
We’re seeing tax functions being forced to evolve and simultaneously, there’s pressure from C-Suite down who see the possibility of big savings and better insight.
It’s forcing quite a different conversation for a traditional tax person that hasn’t had to think about systems or changes in the past. They’ve only had to think about someone else delivering the data and how to use it.
The days of having people re-keying data are a thing of the past. There are many ways to apply Artificial Intelligence and machine learning to the tax setting.
With the massive amounts of data corporates are dealing with, it can take a human up to 75 hours to review ten thousand lines of transaction data. We now have machines that can do that in seconds. They can do it to a better standard, with better quality and they keep learning.
Change the conversation
According to the analytics study, the top pain points experienced by companies are lack of budget and organisational commitment (60%), and a culture of decision making based on intuition rather than data for 56% of respondents.
Getting data from ERP systems and applying the tooling and technology they have in the organisation is critical but generally, most tax or finance people won’t know what’s there.
That’s why at EY we’re having the most impact because we’re able to come in and help navigate that conversation.
The most powerful conversations happen when you get tax, finance and IT people in the same room - it makes a big difference. The IT people can typically understand the enterprise systems and finance are typically providing a lot of the data to support tax from the ERP system.