7 ways technology can help Tax Directors improve efficiencies

For most businesses, the amount of time being spent on tax compliance has increased considerably over the past decade.

Take, for example, an Irish company supplying electronically supplied services (‘ESS’). Historically, that business may have only had to consider its indirect tax compliance obligations in Ireland but that is certainly not the case anymore. In light of the BEPS agenda and a global shift towards the ‘destination principle’ of taxing ESS, that same business likely has indirect tax compliance obligations across the world now. While complying with such obligations may be relatively painless within the EU, the task becomes significantly more difficult and time-consuming when you consider the rules in non-EU jurisdiction (some of which tax both B2C and B2B transactions), and the impact that such obligations have on a company’s internal systems.

The effect of increasing compliance obligations has dictated how a Tax Director spends their time. We typically see the role of the Tax Director as having four aspects; catalyst, strategist, steward and operator (collectively referred to as the four faces of the Tax Director).

Four faces of the Tax Director

1. Catalyst – driving behaviors to execute strategic and financial objectives (e.g. enhancing the Tax team’s collaboration and visibility throughout the business).
2. Strategist – providing tax leadership for strategic business direction and strategies that impact on performance (e.g. post-merger integration).
3. Steward – protecting and preserving the critical assets of the organisation, and accurately reporting on the financial position (e.g. indirect tax compliance related efforts such as real-time reporting).
4. Operator – balancing capabilities, managing talent, scrutinising costs and service quality to efficiently fulfil the Tax function’s core responsibilities.

Our research has revealed that many Tax Directors are currently spending over two-thirds of their time on steward and operator activities.

For many, when they consider a career working in tax, they desire a role which allows them to focus on the catalyst and strategist roles. Unsurprisingly, our research has found that most Tax Directors aspire to allocate the majority of their time to such activities but are unable to do so due to the time and effort spent on steward and operator activities.

While processes can be improved in order to free up time to focus on value-added work, that alone is unlikely to be sufficient to shift the focus. Leveraging people more efficiently and hiring additional staff do provide an answer. However, in practice, budget constraints for staffing typically means that this may not be a viable solution for most companies. The more feasible solutions can come in the form of technology.

7 examples of how technology can help

1. Tax coding in ERP systems
   While some businesses assign tax coding to transactions, there are still a significant number of businesses that do not. Implementing tax coding (both for accounts receivable and accounts payable) typically improves the time spent on the preparation of VAT returns, and also reduces the need for manual intervention. Implementing a tax determination engine can also be very beneficial especially in more complex companies.
2. Reporting functions in ERP systems
   The standard ‘off the shelf’ tax reporting features in ERP systems are often suboptimal but, with a level of investment, can be adapted to provide long-term benefits (such as a significant reduction in the time and effort required to prepare VAT returns while also mitigating or even eliminating instances of human error). Investing in improving the quality of data that can be extracted from ERP systems normally provides instant results.
3. VAT compliance preparation software
   Where tax codes are assigned to transactions, businesses can explore using VAT return preparation software. Such software is typically designed to ‘map’ a business’s tax coding logic and then generate draft VAT returns across different jurisdictions.
4. Jurisdiction obligations
   Many businesses track statutory compliance deadlines in an Excel spreadsheet saved locally or in a shared drive. While this can work for some businesses, moving to a cloud-based tracker gives greater visibility to staff, and saves the time required to update other staff separately. It can also be shared with or viewed by a third party (such as an adviser where a compliance outsourcing or co-sourcing relationship exists).
5. Robotics Process Automation (‘RPA’)
   Most businesses are yet to consider the application of RPA to their VAT reporting but it can bring significant benefits to repetitive tasks. For example, a robot (a piece of software) can be configured to run reports from ERP systems and then save those reports. In businesses where there are large or numerous reports to run, the prospect of automating such tasks is extremely appealing especially given that the software can be programmed to run off-peak when systems often lie idle.
   
   You can, of course, design the robot to do far more such as preparing VAT returns, filing the returns, and sending automated emails to those responsible for preparing returns etc.
6. VAT rate product reviews
   For businesses that supply thousands of different products, the idea of undertaking a review of the VAT rates applied is daunting. Companies rarely have staff available to perform the review, and the perceived costs associated with engaging an adviser to do so normally results in a review not being undertaken until errors are identified. At Deloitte, we have developed (artificial intelligence and machine learning) technologies which enable us to provide clients with cost-efficient solutions in this area.
7. ESS compliance obligations
   We have created a portal which our clients can access to keep up-to-date with the latest ESS VAT and GST (B2B and B2C) changes across the world.
   

Concluding remarks

Our research has shown that more and more of a Tax Director’s time is being consumed by compliance related tasks. Due to staffing constraints, the way of dealing with increasing compliance activities for many Tax Directors has been to ‘run’ or ‘pedal’ faster. While this has worked for many so far, there is a realisation that it is not sustainable in the long-term as more jurisdictions introduce additional obligations. Embracing technology is likely to help most Tax Directors in reducing the time they spend on steward and operator activities, allowing them to increase their focus on catalyst and strategist roles.

Should you have any queries or would like to discuss our tax technology solutions, please feel free to contact us.