Tax Automation

Do more with less through tax automation

Tax departments have been coming under increasing pressure in recent years, as tax rules grow more complex and digital technologies transform the environment in which tax professionals operate. It’s getting harder for tax teams to keep up. Simply hiring more people isn’t a sustainable proposition, especially when company leadership looks to tax for more forward-looking insights.

While pressures on the tax function are rising, technology advances are opening the door to new solutions and providing a foundation for tomorrow’s tax department. It will be a function that combines mountains of data with incredible processing power. Human understanding and judgment with machine execution. Absolute accuracy with limitless scale. How? Through tax automation. And the Power of With.

Tomorrow’s tax function is automated

While it’s impossible to predict exactly what the tax department of the future will look like, some key elements are becoming increasingly clear. It will be massively data-driven, operating in real time and taking a more holistic, enterprise-wide approach. Tax departments will have access to all of their organization’s source data at a far greater level of detail, providing greater precision, accuracy—and, crucially, transparency. Algorithms will augment human tax expertise and knowledge. Robots will relieve humans of the drudgery of time-consuming, repetitive, manual tasks. And automation will free tax professionals to focus on strategy, working with machines to deliver valuable insights to the business.

Compliance is driving the need for automation

Compliance already takes up a huge portion of the typical tax department’s time and energy—and tax authorities and regulators are raising their level of scrutiny and placing new demands on organizations. Companies are increasingly required to disclose their tax processes and governance frameworks, invest in tax technology upgrades, and adopt reviewable tax controls. As they struggle to keep up, the need to adopt new technologies to improve the efficiency of tax compliance, reporting, and analysis only grows more pressing.

RPA and cognitive computing: the gateways to tax automation

Robotic process automation (RPA) and cognitive computing are likely to have the most dramatic impact on the tax function in the near future.

RPA refers to the automation of rules-based processes using software. In a tax context, RPA is especially valuable for automating repetitive, rules-based, manual tasks, such as populating reports and gathering data to feed downstream processes and advanced analytics. Indirect tax teams, for example, are using RPA to gather data from multiple sources, generate jurisdiction-specific adjustments, perform reconciliations and notify team members of any exceptions, and produce standardized output files and jurisdictional summaries. Bots can then submit finalized data to the websites of tax authorities, and monitor and document acceptance confirmations from those sites.

Cognitive computing

Cognitive computing is about enabling machines to become increasingly more accurate at spotting patterns in data and then using that ability to help make decisions in areas that have traditionally required human intelligence, judgment, and complex analysis. Cognitive technologies don’t just learn how to make decisions based on historical data—they actually improve their decision-making ability as they uncover exceptions and work with humans to resolve them. For example: tax departments can use machine learning to automatically classify expense data across tens of thousands of potential categories to support tax calculations, saving tax teams untold hours of work and reducing the likelihood of errors.

Tax automation isn’t optional…

It’s no longer feasible for tax departments to handle rising challenges by hiring more staff—there isn’t enough talent available in the market today. What’s more, the complexity is skyrocketing as organizations navigate dozens or even hundreds of tax jurisdictions, each with its own rules and regulations. Given how complex many of the new rules are, the modelling needed for effective tax planning can’t be done without the aid of automation. The bottom line? Automation isn’t optional. Companies and their tax departments are going to need machines, bots, cognitive tools, and other technologies to handle the work.

The business case for modernizing the tax function is abundantly clear for almost any enterprise. Done right—and appropriately, based on the business’ needs—modernizing tax through automation can help manage the overall burden, ensure rebates and credits are applied for, reduce cash leakage due to overpayments, and more. Tax transformation is also key to enabling tax teams to grind through data and scenarios to provide leadership with the best advice and to manage tax-related risks. If your company isn’t embracing the case for tax transformation and automation, it’s leaving real value on the table.

…But it doesn’t have to be overwhelming

Organizations may recognize the potential benefits of tax automation, but they’re often wary of the perceived upfront investment, time commitment, planning required—and the risk the effort will quickly grow in scope, complexity, and cost. But tax automation doesn’t have to be a massive, “big bang”-style initiative for companies to start realizing the benefits. RPA implementations in particular typically require nominal investments and can be implemented within a pre-existing IT infrastructure. This enables tax teams to deploy “bite-sized” automation that focuses on smaller, discrete processes to achieve quick improvements and faster returns on investment (ROI).

The way forward

So how can tax departments prepare for a more automated digital environment? Here are some suggestions:

• Identify scalable processes. Identify processes that can be reimagined and transformed using automation technologies. The ideal candidates should be scalable, have high potential for productivity improvements, and influence multiple outcomes with minimal incremental cost—data extraction, for example.
  
  
• Prioritize transactional tasks. Automating transactional tasks, such as indirect taxes and some tax information reporting, can free up time for tax professionals to focus on more strategic matters.
• Align with organization-wide digital transformation initiatives. Any digital transformation work in tax should support broader corporate objectives, from finance transformation to corporate restructuring and beyond.
• Communicate the expected ROI. Qualitative and quantitative ROI will help the business prioritize tax transformation efforts. Examples include hours saved, data-quality improvements, and impact on data analytics.
• Reskill existing talent. To work and thrive in a world of automation, many tax professionals will need to learn new skills and competencies, including digital skills, project management, strategic analysis, and more specialized technical tax knowledge.

It’s time to harness the Power of With

Deloitte member firms around the world are exploring how tax departments can use the Power of With to automate the tax function and bring new value to their organization. Ready to learn more? Start here.