The next generation of tax is focused on digitization of operations. The modern-day tax department is faced with tackling numerous operational, legislative and technical challenges.
We are seeing significant shifts in the approach to handling international taxation owing to initiatives such as the OECD’s Base Erosion and Profit Sharing (BEPS) 2.0 framework, and handling tax consequences stemming from a global supply chain that has been disrupted significantly since the advent of COVID and additive ESG tax-related responsibilities.
In addition to these responsibilities, tax departments are tasked to deal with organizational imperatives for digital transformation and digital reporting. These initiatives require significant data collection which often is a cumbersome process as tax departments source data from numerous sources.
Investments in digitization and tax analytics
A recent 2022 survey conducted by the EY US LLP Tax Technology and Transformation (TTT) practice highlights that nearly 91% of CFOs are investing in transforming their tax function, and nearly 74% of tax functions were involved in major finance or IT transformation initiatives in the past two years.
A key area for investment today in digital transformation for tax where quick wins get delivered is in the realm of analytics.
Analytic tools for tax are no longer a nice to have but a must have for critical aspects of business operations. The value delivered through having tax analytics is you gain rapid data alignment via establishing a single source of truth for tax data, and standardized data transformation maps that help you understand how the data was consolidated for reporting. This has provided increased accuracy, transparency and timeliness for reporting and analysis, and simplified tax operations as data gets sourced and used consistently.
The end result is a digitized tax output that has considerable time savings in data collection, cleansing and processing. What takes roughly weeks for traditional methods of tax data collection and processing to accomplish now takes minutes with analytics, all while handling ever increasing volumes of data, and delivering rich insights.
Going from zero to analytics in minutes
It’s important for companies to look for solutions that will enable the organizations to review their tax positions and validate their tax return’s accuracy with year-over-year trends and drill throughs, as these are key attributes in the delivery and operationalization of tax analytics.
Organizations can greatly benefit from solutions that are easy to use, can process a large amount of data quickly, render them in a digestible format, and integrate with technologies that enable mobile and digital experiences. With these efficiencies, tax processors can shift time away from data operations to higher-valued outputs such as strategic insights- enabled decision making and better tax planning. Solutions for tax analytics pave a holistic way to executing a successful digital strategy that is:
- Insightful – i.e., ensuring that you are delivering meaningful content that is both contextually relevant and actionable;
- Responsive – has the ability to real-time connectivity to the data and not after the fact; and
- Efficient – is effective, scalable and easy to implement
While innovating in the market, companies must constantly think about what will drive adoption with a large user base. This problem is made quite complex for tax departments as the input ingredients are seldom the same, owing to different tax functions having completely different sets of systems where they run their tax operations.
It’s a common saying in our industry that no two tax clients are the same because of this reason, so it’s important for companies to look to solutions that will resonate best with their operational and data challenges.
