In a new episode of the Tax & Tech Talks podcast series, experts from KPMG and Thomson Reuters discuss how companies are turning to automation and analytics software to stay ahead of changes buffeting indirect tax management.
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The episode, “How Tech Can Help You Navigate the New Tax Rules and Tax Trends,” features Chris Harris, tax technology solution consultant, Thomson Reuters; Chris Reich, indirect tax product management director, Thomson Reuters; and Dan LeCompte, senior manager in KPMG’s Transactional Tax Systems practice.
The panel identified five tax trends likely to create new obligations, increased workload, and operational challenges for companies’ sales and use tax, VAT, and GST teams:
No end to remote work: Indirect tax professionals need software solutions to connect dispersed teams
The COVID-19 pandemic accelerated the need for tax technology that facilitates remote work – a trend that was already underway due to the transition to cloud tax platforms in recent years. “I don’t think that’s going away,” Reich said. “We’ll get back to our offices, but we’re still going to work on disparate teams and teams that are geographically separated.”
Changing tax rules and rates: Governments look to indirect taxes for revenue after COVID-19 stimulus packages
Government stimulus packages implemented in response to the pandemic created public debt that policymakers may address by enacting or increasing indirect taxes – which is considered less politically risky than increasing individual or corporate income taxes. “There’s so much flexibility with indirect taxes that we expect to see much more reliance on them as a source of revenue for these governments,” Reich said. “Indirect tax is going to continue to be one of the levers they use to generate revenue and stay solvent.”
Greater government scrutiny: Aggressive indirect tax audits are expected as soon as this year
Governments seeking to bolster their revenue streams also are likely to increase the number and intensity of indirect tax audits, LeCompte noted. “We’ve been telling our clients to prepare for aggressive audits coming as soon as this year. All that stimulus money has emptied government coffers, and the best way for them to recoup it is to . . . analyze (corporate) financial statements and tax returns and look for holes where they can apply penalties to fill in some of those gaps.”
More outsourcing: Companies are outsourcing routine tasks and shifting focus to strategic indirect tax activities
Companies are accelerating efforts to outsource back-office tasks to improve operational efficiency, LeCompte said, and routine indirect tax compliance activities may be a candidate. “It creates a competitive advantage because it helps (the tax department) streamline and focus on value-added activities such as tax data analytics, looking for ways to reduce tax burdens and improve margins.”
Heightened reporting requirements: Tax authorities move toward real-time filing
Tax authorities increasingly are adopting e-invoicing and near real-time transaction validation and tax remittance. “(Expect) more of a shift away from monthly filing to as close as possible to real-time filing,” Reich said. “The way (for companies to comply) is having really good systems and really solid processes and accurate data.”
Companies are turning to technology, data, and new compliance processes to stay ahead of the worldwide trend toward digital tax reporting, rapid-fire filing requirements, and heightened scrutiny from tax auditors.
Get more value from your indirect tax data with the right reporting and analytics software
Addressing these issues, Harris said, hinges on “making tax data more accurate, accessible, reliable, and then translating it into automated solutions that can drive tax calculations and help prepare your returns more efficiently.”
This is not a one-size-fits-all proposition, Reich noted. “Every organization has slightly different needs for data and information,” he said. “Even organizations in the same industry will ask different types of questions because their business processes maybe a little bit different or their policies may be a little bit different, or their goals may be slightly different regarding how they’re selling and servicing their products.”
As a result, companies need bespoke technology solutions that enable tax data to be seamlessly pulled from disparate-but-integrated systems, standardized, deployed in various applications, analyzed, and shared to support compliance tasks and strategic business decisions.
“When companies reach out to us, we try to make sense of that spider web of data and find the granularity (the tax department) needs to drive analytics and innovation,” LeCompte said. “The best way to do that is by mapping it out, making sense of that data, and presenting it to the tax department in a way that’s consumable . . . in a format they can use.”
The panel noted several steps that will move indirect tax teams down this path:
- A tax technology roadmap: Ensure the indirect tax department is involved from the beginning whenever business systems are being upgraded. “The most successful projects that I see bring tax in on day one,” LeCompte said. Given today’s fast-changing, increasingly demanding indirect tax landscape, however, the tax department needs automation and analytics now and shouldn’t wait to piggyback on other IT projects. “Go to your leadership and say, ‘I have a way to minimize our audit risk and it will make us more agile if we can do some of the automation, some of the analytics, now,’ ” LeCompte advised.
- Thorough, up-to-date indirect tax content: In the US alone, there are 15,000 tax jurisdictions administering more than 50,000 tax rates, Harris noted, so companies need confidence their tax engine software reflects the latest rules and rates everywhere they do business. Too many companies, he said, rely on homegrown manual processes that are time-consuming to maintain and error-prone.
- A simple metric for tax technology success: Tax automation and data analytics initiatives are successful, the panel noted, when the technology operates so smoothly that people forget about it. Reich said the tax engine’s first job is to streamline compliance – “That’s the baseline” – but its true value is the delivery of strategic indirect tax insights.
“The real success – once you’re running day-to-day, week-to-week, month-to-month – is your tax department becoming a strategic partner,” Reich said. “Are you holding too much in reserve because you’re not quite sure what your taxes are going to be? Are you getting all the available credits? Are you getting all the VAT returns done? Are you recovering your VAT? Being a strategic partner and helping your business make the right financial decisions – that’s where you start seeing the real value of having a tax automation system with good data and solid processes.”
Download our free whitepaper, “Get access to your indirect tax data for faster analytics and reporting,” to learn how indirect tax teams can deliver strategic business insights with easy-to-use analytics solutions.
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