Technology’s impact the international accounting and tax landscape cannot be overestimated. There are two main drivers. First, companies must strive for more efficient processes to help reduce operational costs. Some 40% of non-value-added tasks could be eliminated by 2022.
Second, businesses and finance professionals must dovetail the ongoing efforts of tax authorities worldwide to implement digitisation. Future finance professionals will have developed IT skills and be able to relate them to a company’s technology capacity. They must be capable of operating at board level to influence operational and trading policies and decisions over tax.
Companies acknowledge that they must accommodate digitally connected tax functions, where tax data is centralised and used to anticipate and project the tax consequences of various regulatory changes. A disjointed landscape where data sits on different systems, containing a growing volume of data, is a liability.
The scene is really being set by tax authorities all round the world who are embracing digitised tax reporting. This presents a host of demanding requirements which can only be met by advanced technology. How do such developments feed into accounting and tax processes? Does the business possess the right levels of expertise – and budget – to make the necessary changes?
A recent digitisation initiative in the UK – Making Tax Digital – required companies to adjust the way they maintained and used specific technology to link to HMRC’s reporting portals and systems. Corporate taxpayers who were using Excel spreadsheets have had to adopt new accounting methods.
Introducing electronic reporting puts a strain on company resources requiring a thorough reorganisation to identify:
Whether data that needs to be reported is available
A VAT cleansing exercise with a potential client in the UK had taken three years to align with changes in VAT reporting requirements. As we find when we take over a VAT client’s operations, it is better to conduct a thorough data quality assessment before introducing new systems to meet new regulatory requirements.
Whether existing processes are good enough
Are they good enough to support the collection and processing of the necessary information? I have seen many instances of individual companies using different software, databases and sources of data. When you have this kind of mismatched infrastructure, any move towards a more digital approach
is going to be very challenging. Rationalising your systems and the way in which you collect and process data will equip you for whichever digital direction you need to take.
Whether existing technology is sufficient
Can it support data transformation?
Usually, bridging technology will ensure compliance. When deploying new technology, companies must consider:
Number of data sources
The more you have, the more people you need to reconcile that data. Begin by rationalising those data sources.
Manual input is more likely to corrupt data. Technology should aim to close these gaps.
Adjustments still need to be made outside transactions recorded in the system such as the calculation of output VAT on goods provided free of charge. The accountants and tax specialists
of the near future must be de facto
IT professionals, working with AI, automation technologies and application programming interfaces and analysing large amounts of data in real time. Increasingly, tax directors will need to be on operating boards, influencing operational and trade policies if companies are to meet many and varied jurisdictional requirements.
If you are a tax professional who needs to drive change, here is my four-item checklist:
1. Gain global visibility of your tax data.
2. Create the right operating model, balancing skill, knowledge, process and technology.
3. Assess the control framework needed to manage tax risk.
4. Benchmark your tax function and put the right KPIs in place.