Improvements in technology have fundamentally changed tax authority expectations on how much data a company can provide and when. For many companies, digitalisation is the only way to stay compliant as authorities migrate to a real-time, digital indirect tax environment.
In a recent webinar organised by Thought Leadership Global in partnership with Thomson Reuters, a panel of global speakers discussed when to start the digitalisation tax journey, from the transaction and invoicing level to the point of filing returns. Panelists also explored key obstacles and acknowledged growing demands placed on indirect tax departments. In addition, the group considered how tax software solutions are evolving to address emerging needs.
The need for accelerated digitalisation
Central to the panel discussion was the reality that indirect tax departments can be reactive — they do their best to respond as needed to authority requests, secure savings, and deliver strategic advice. However, as authorities introduce additional reporting requirements, demand transaction-level data, and harness digital tools to cross-check information to find mistakes, businesses that rely on manual processes are struggling to keep up.
Add to that the shift toward real-time reporting and the pressure of increasing tax complexities and responsibilities, and it becomes clear that tax teams must digitalise the transaction lifecycle so they can keep up with the volume of commercial transactions for reporting and stay ahead of accelerating changes.
What are the benefits of digitalisation tax determination and compliance?
Participants agreed that digitalising, when done well, can enable the entire organization to capitalize on accuracy and efficiency gains. Positive impacts include:
Improving your risk profile
Companies that digitalise, see a reduction in the number of incorrect invoices and the need for credit memos. Jason Alber, Senior Business Systems Analyst at Poly pointed out tax authorities could soon target companies with a higher percentage of credit memos for audits. Peter Swann, Vice President, Product Operations, Thomson Reuters added that authorities are less likely to want to assess the compliance and controls of a company with clean data and few adjustments to their ERP.
Bringing money in sooner. Incorrect invoicing delays customer payment
Adding value to other departments. Helping other teams in their language and processes and preventing mistakes by alerting them to data anomalies.
Doing things faster
The end-to-end transaction lifecycle software, like a tax engine, automates decisions, determines tax calculations, and provides a real-time risk assessment. It can reduce time spent on research and help with decision-making.
Tips to digitalise your indirect tax life cycle
There are many components to a successful migration to digital tax. The panelists had many ideas on how to get started based on their organisational experience:
- Seeking company willingness is a natural first step. If leaders feel the old ways of doing things and the Excel files still work, then tax will not get the support it needs — so it is vital to articulate urgency for change.
- Communication is key so stakeholders are aware of the tax team’s requirements.
- The importance of accurate and correct data is critical — Having access and the means to efficiently analyze data offers an array of benefits, especially given evolving global regulations and the increased level of scrutiny.
- Understanding your data and commercial processes. If operating multiple systems, look for opportunities to eliminate manual workarounds.
How do you overcome obstacles created by digitalisation?
Limited resources — people, technology, and money — are the biggest obstacle to digitalising processes.
- Take stock of what is lacking and what is needed to improve on when devising the digital roadmap.
- Look for missing skills elsewhere in the organisation of your team
- Champion the need for the tax function to clarify the ownership of commercial or business processes like invoicing, so tax teams are not overwhelmed.
- Control data and ensuring the output is correct. Catching errors before moving on to invoicing.
- Highlight the challenge for multinationals to operate consistently within the organisation because tax obligations differ slightly between countries. This is where the tax engine software is invaluable, and future tax solutions will increasingly take into account the need to pass data to other applications for checks.
Take your first steps to digitalise indirect tax
If you want to find out what is involved in automating your indirect tax processes, along with the benefits you can expect and pitfalls to avoid, this webinar offers invaluable insights and tips from those who are already on the digital tax journey.
Explore how to future-proof your organisation today with a digitalised indirect tax life cycle by ONESOURCE.