It’s important, however, that the indirect tax function optimizes its use of technology and that includes deciding where in the life cycle it should be used. “If you break down the entire VAT life cycle, it can be split into accounting, compliance, controversy and planning,” explains Dossche. “The accounting aspect, such as accounts payable, is typically owned by the finance function, and there is the opportunity to automate certain processes to make sure the VAT amounts are captured properly.”
The next step, around compliance, is where tools can be used to transform data and put it in the right format to file it to the authorities. Many of these tools already exist, and compliance can be enhanced further using visualization tools which help in creating that all-important visibility.
The challenge, of course, is which technology to choose and also how to source it. There is plenty of off-the-shelf software, but it typically can’t be tailored, so is limited in its scope. As VAT reporting evolves, businesses will need better management, interrogation and manipulation of data before it goes into the returns. And that includes the use of analytics to give them some insight into that data, whether that be around errors or trends.
“The challenge with technology, especially if you want to use it end to end, is that it can be very expensive to build and maintain,” says Bromley. “So, a company is going to have to make the decision whether to in-source and build it themselves or instead consider a co-sourcing or even full outsourcing arrangement, where they leverage off the technology investments of external providers.”