Indirect tax departments large and small are in constant need of accurate tax data analytics to comply with ever-evolving global tax regulations. What’s changed is the speed these requirements have come into effect.
Historically, manual data analysis – time permitting – has been the only option for corporate indirect tax professionals. Still, advances in data analytics now offer the tax department a new level of insight. Data insight is no longer a “nice to have” option as international tax authorities are increasingly demanding invoice and tax data in real-time.
Indirect tax departments are now responsible for revealing all their data patterns, trends, and associations that impact tax across their business. Having access and the means to efficiently analyse this data enables businesses to minimise their risk and avoid hefty tax penalties.
As technology advances, tax authorities are progressing their technical ability to pivot, drill into, and filter the most relevant information and apply advanced analytical algorithms. The trend towards digital tax reporting and vast amounts of underlying data is already happening in many countries, for example:
- Making Tax Digital (MTD) — UK
- Real-Time Invoicing — Argentina, Brazil, Columbia, Costa Rica, Ecuador, Hungary, Indonesia, Mexico, Peru, and Spain
- Goods and Services Tax (GST) — India
- SAF-T — Austria, Belgium, Lithuania, Luxembourg, Norway, and Poland
Data analytics goes beyond systems, departments, and organisational divisions to serve the business in its entirety. Systematically applying data and analytics across all areas of a business — from supply chain to tax regimes — will eventually enable businesses to allocate precious investment funds more quickly and with greater confidence.
Today, very few organisations have access to clean, complete, and detailed tax data on-demand for all of their global entities. However, the latest developments in indirect tax technology are now bringing the profession closer to being able to see their entire tax data picture.
Challenges and advancements in tax data analytics
There are many obstacles to achieving tax data analytics perfection. One challenge is how to map and merge structured data that exists in enterprise resource planning systems (ERP) and other relationship management tools with unstructured data, generally found in most spreadsheets, documents, and productivity applications.
Indirect tax teams are responsible for locating, mapping, and synthesising all relevant data to create standardised and suitable reports for their myriad global tax obligations. This is where advances in tax technology can provide significant benefits.
New database technologies such as NoSQL and in-memory databases, which are typically associated with big data, offer benefits that relatively few tax systems currently leverage. In the future, you can expect to see faster processing of tax data, as well as tax systems that can dive deeper into transaction-level detail, where previously only trial balance data may have been used. This advancement will enable indirect tax professionals to handle data with more volume more effectively. These advancements in database technology mean that the quantity and integrity of data are becoming much less of an issue than they were in the past. While there was once a time where tax professionals might sample a subset of the data for audit, automated processes are increasingly testing all the data in a shorter and more reasonable amount of time.
Data analytics for today’s demanding tax environments
Having a handle on all your tax data is critical — especially as modern indirect tax professionals look to elevate their position within their organisation and ensure tax is involved in crucial business decisions.
Whilst most professionals are still trying to remain compliant in a world of ever-changing regulations, it’s important to look beyond the typical duties of the tax department and know that advances in technology will soon enable your indirect tax teams to consume data and draw conclusions more quickly and efficiently. For forward-thinking indirect tax professionals, using tax analytics software tools can create a holistic, global tax story that will aid in both compliance and strategy.
Having a software solution that enables you to connect across the different operations and data sources can be invaluable. Instead of spending time collecting the information required from various sources, your team can focus on high-quality analysis and planning activities. The right tax software can help get you out of the “heads down” world of risk management and compliance and empower you to look ahead and ensure tax is viewed as a true value-add for the company.
Beyond just the tools that are available today, it’s also a good idea to ask your indirect tax technology vendor about their technology roadmap and take the time needed to understand the benefits they can offer, now and in the future. Are they exploring artificial intelligence, natural language processing, and more to enhance your analysis capabilities? Are they looking ahead not just to what’s possible now but what will be possible in five years? Having a forward-thinking indirect tax software vendor can ensure that your tax department stays ahead of technology changes and demonstrates even more value.
By harnessing the power of analytics and innovative technology, corporate indirect tax departments will ultimately enhance their ability to plan strategically, validate results, and influence business decisions. Above all, the effective use of analytics will ensure that your organisation can adapt nimbly to the evolving changes that have become a staple of the global indirect tax landscape — and perhaps that is the most significant power of all.
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