9 indirect tax filing challenges technology can solve

With multiple jurisdictions to monitor and increasingly aggressive tax authorities, indirect tax compliance professionals are feeling the pressure. This pressure comes from a global environment where the rules of commerce and taxation are constantly evolving at an unprecedented pace. The direct financial penalties of “non-compliance” may be substantial, but the real cost is the cumulative effect of disruptions to operations, diversion of resources from core activities, and uncertainty about potential hidden liabilities.

So, efficient and accurate management of indirect taxes, including the critical functions of preparing and filing tax returns and statutory reports, is more essential than ever. But the traditional approach of a patchwork of legacy systems, spreadsheets, and sheer human effort for indirect tax processes can’t meet today’s challenges. Only by harnessing technology can organizations meet those challenges—and free up indirect tax professionals to help strategize how to turn those challenges into advantages.

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The growing pains for international indirect tax professionals

The path forward for indirect tax in a changing world

Use technology to address indirect tax challenges

The growing pains for international indirect tax professionals

The pressure on indirect tax professionals is immense, multifaceted, and stemming from interconnected challenges:

1. Explosive complexity and volume: Tax teams are tasked with navigating a labyrinth of global regulations—VAT, goods and services tax (GST), U.S. sales and use tax, and countless others—each with its own intricate rules, exemptions, and filing cadences.
2. Manual processes and the high cost of human error: When tax managers rely on spreadsheets, they must manually export sales data and spend hours cross-referencing, reformatting, and manually keying data into a master compliance spreadsheet with hundreds of tabs. The process is slow, opaque, and fraught with peril.
3. Product data challenges across the tax lifecycle: As a business grows, so does the complexity of its indirect tax compliance, largely driven by the journey of its product data.
4. The volume and velocity of transaction data: Even the most capable teams will be overwhelmed by the sheer amount of data; sorting through it will trap valuable tax professionals in a reactive, defensive posture, rather than allowing them to use their strategic potential to advise the C-suite.
5. More frequent reporting requirements: Many governments now want indirect tax payments soon after a transaction is made—or, in some cases, when a transaction is made. Along with this increased intrusion at the point of sale comes a tighter focus on ensuring compliance, which is causing an uptick in audits.
6. Lack of real-time visibility and control: Effective management is impossible without clear, timely data. Yet, most tax teams are forced to navigate by looking in the rearview mirror and consolidating financial information from a collection of disparate systems.
7. Data silos and integration headaches: Lack of visibility into indirect tax is a direct symptom of disconnected systems and data silos. The “integrations” that do exist are often brittle, custom-coded connections built on legacy systems and maintained by an overworked IT department.
8. Manual reconciliation and compliance processes: Even with unified data, a critical challenge remains in reconciliation. When done manually, this is an immense burden as teams must align e-invoicing data with traditional tax returns, download data from multiple ERP and billing systems, and spend time and effort checking invoices before preparing VAT returns.
9. Heightened audit exposure and penalties: Defending a tax position with a collection of conflicting spreadsheets and fragmented data is a losing battle. An audit becomes an archaeological dig through old emails, invoices, and reports.

The path forward for indirect tax in a changing world

These challenges are daunting, but they’re not insurmountable. Consider a comprehensive digital transformation that automates the end-to-end process of managing and filing global tax returns. One option is Thomson Reuters ONESOURCE Indirect Compliance, which directly counters each pain point.

By moving beyond outdated manual methods and embracing technology, organizations can simplify the complex indirect tax process—and thereby unlock corporate productivity.

• Gain precision and accuracy with AI-powered compliance: Automation replaces manual, error-prone tasks with systematized, repeatable workflows. AI (artificial intelligence) provides cognitive power and transforms downstream compliance and upstream data accuracy. In the downstream compliance process, AI is critical for building a touchless, and therefore more accurate, system.
• Unleash productivity via cloud and automation: When routine compliance is automated, tax professionals are free to act as proactive strategic advisors rather than reactive data wranglers.
• Get elasticity and scalability: Cloud-native platforms are the essential engine for this newfound productivity. They can handle massive transaction volumes and seasonal business peaks without requiring costly IT intervention or new hardware. Cloud systems can efficiently process and reconcile massive datasets, preventing slowdowns and failures that jeopardize timely filings.
• Acquire real-time visibility and proactive risk management: By integrating seamlessly with ERP, e-commerce, and billing systems, a centralized, cloud-based platform creates a single source of truth for all tax-related data. This data is then brought to life through dynamic dashboards and reporting tools, providing an immediate, unified view of the company’s global tax posture.
• Fortify audit defensibility with seamless integration: A modern tax platform transforms a moment of panic into a simple process of verification. The system provides a comprehensive, immutable audit trail for every single transaction. Automated reporting capabilities can generate the precise data formats required by tax authorities, simplifying responses and turning adversarial audits into collaborative verifications. This confidence is underpinned by modern APIs and pre-built connectors that ensure a seamless, robust integration with the existing enterprise technology stack.

Use technology to address indirect tax challenges

Adopting this technology stack does more than fix problems; it fundamentally transforms the purpose and potential of the indirect tax function. Compliance remains the non-negotiable foundation, but it ceases to be the ceiling.

With the immense burden of manual processing lifted, the team’s focus can shift from defense to offense—from cost mitigation to value creation.

Want to learn more about how harnessing technology can help your organization manage indirect tax compliance in an efficient, effective way? Download our new e-book, “Mastering global indirect tax filing risk in a real-time world,” now.