As technology advances, so too does the reality of tax authorities wanting to drill into an organisation’s indirect tax processes to assess its compliance and controls. Failure to comply with tax legislation and demonstrate adequate controls can have a range of consequences, including penalties levied by authorities. Having end-to-end value-added tax (VAT) compliance software for your transaction lifecycle can help your business stay ahead of the accelerating changes coming out of tax authorities and remain complaint, regardless of what is thrown in your direction.
The demands on indirect tax departments have never been greater. The modern indirect tax professional is now responsible for identifying patterns, trends, and relationships between all the data that impacts tax in their organisation. Their responsibilities are now far beyond simply handling that data and ensuring that it has been formatted and summarised correctly, so that returns can be filed accurately and in good time. Indirect tax teams are fast becoming data scientists with access to information and the ability to efficiently analyse tax data analytics to drive a variety of benefits, ranging from reducing risk and streamlining processes to global compliance.
Indirect tax teams need a tax engine to help them get tax right. Technology should do more than help indirect tax teams at the point of filing VAT returns. It should be working at the very foundation, at the point where transactions take place and invoices are created. It should equip them with the ability to share key information with the wider organisation, or even tax authorities, in real time as transactions occur or on-demand.
Our personal experiences and expectations of technology have been set incredibly high thanks to the companies we use in our personal lives for e-commerce, entertainment, and even food and taxi services. We now assume that real-time, transparent information about our transactions should be instantly available. The same can said at work for digital tax reporting! The technology really does exist to truly transform and help automate and manage VAT and other tax processes.
Indirect tax software not only promises but also delivers on cost savings, faster data analysis, clearer decision-making, and the ability to streamline repetitive tasks. The 2020 Thomson Reuters European Corporate Tax Managers Survey Report found that, while facing daily pressures from the board, management, and other stakeholders to become more efficient and effective, more than half of respondents felt that their tax teams were under-resourced. They also identified significant skills gaps, both tax-related and technological.
At Thomson Reuters, our technology works with your indirect tax department to manage the end-to-end process of digital tax reporting. The old ways of doing business – Excel spreadsheets from siloed business units – are giving way to a more unified, automated approach.
The same survey showed that the average spend on technology was 10% of the total budget for corporate tax departments. Notably, tax departments that allocate more than 10% to technology tend to have less overall spend relative to revenue – a clear testament to the direct benefits of investing in technology and the cost savings it can bring through automation.
What makes a successful indirect tax team: people, process, and technology
In our experience, the most successful indirect tax teams typically share three characteristics in their approach to technology.
A clear strategy of how the indirect tax technology platform will be deployed, with short-term and long-term gains
Rigorous KPIs to track and report back on the return on investment
A team built for success – digital tax reporting is not just a job for the finance or IT department; it needs a team with senior sponsorship that has the end-to-end journey of tax through the business represented
As technology is adopted more widely, particularly by tax authorities, it is imperative that businesses consider how to make the best use of existing and new technology to instil robust indirect tax processes and controls. Adopting the characteristics mentioned above gives businesses a great chance at achieving that. A technology-enabled approach to handle constantly evolving tax requirements has proven to be a huge advantage for indirect tax departments, allowing them to work quickly, efficiently, and accurately through challenging times, such as the COVID-19 pandemic.
Download our ebook “Mind the data gap: Automating indirect tax processes” to learn more.