Tax reform and custom analytics

April 26, 2018

A blog post by Beth Mueller, partner and Tax Analytics Insights leader.

Tax reform brings the impetus for change in the world of tax. Capturing and analyzing data is more important than ever in this new environment. Many of the daily challenges already faced by organizations are heightened by the requirements of tax reform. Tax reform provides the requirement to not only comply with regulatory change but also capitalize on the opportunity to rethink your processes to more effectively drive outcome and value from tax for the overall business in the long term.

Deloitte's Tax Analytics Insights provides tax departments the tailored solutions they need to make better business decisions through the use of data analytics. We focus on the business problem and how analytics can help by digging deep below the surface and bringing new opportunities to life.

Tax reform creating the need for new outcomes

Based on our work, our team has identified common triggers that indicate a need for analytics which stands true, especially in this new post-tax reform era. These triggers center around processes that include a lot of data, that is often changing, where better understanding is needed. Examples include situations where:

• Data requires significant time to manipulate and get into a usable format;
• Filtering and pivot tables are used to explore the data, are ripe for the use of analytics. data is collected and analyzed on a recurring basis;
• Unwelcome surprises might occur due to hidden changes in data; or
• There is a heavy reliance on resources outside of the tax function to get data, slowing down the analysis.

These challenges have long-existed within tax functions and are no surprise to anyone swimming in tax data. And now, tax reform heightens these challenges even more. Tax functions need to keep a close pulse on their key tax drivers, and analytics can help. Below are examples of potential outcomes of applying analytics in tax reform processes.

• Streamline review processes: Significant time is being spent on understanding the new law and addressing immediate needs. The focus will soon shift to sustainable reporting, particularly around new provisions like the BEAT, GILTI, FDII, and interest limitation provisions. Leveraging analytics into the modeling efforts enables resources to spend less time grappling with data and more time planning for the long-term effects of tax reform.
• Liberate preparation time: Data requirements have changed as a result of tax reform. Clients need to understand the new requirements and data elements that are available in their current systems to identify gaps.
• Investigate results: Analytics provides visibility and transparency to companies' data and tax position. Trend analysis, sensitivity analysis, scenario planning and predictive forecasting on changing operational results are all examples of how analytics can help.
• Monitor tax drivers: Keeping a pulse on real-time effects of changing results within the business can be a game changer. Analytics can enable efficient real-time monitoring of data to prevent unwelcome surprises.
• Improve quality: Using analytics to create a new lens to look at data and results from a different angle will improve quality. Models are important, but so is the ability to spot anomalies, outliers, and unexpected results.
• Communicate to stakeholders: Successfully navigating this new tax landscape requires significant engagement at the C-suite and Board levels as companies consider the long-term implications of the new provisions. Communicating complex tax issues in a visual way, without losing the rich detail of the analysis, can streamline communications and enable more insightful strategic decision-making.

Deloitte's integrated approach: Moving beyond modeling

In the era of tax reform, organizations need to take an integrated approach to manage change and build sustainable practices. As the initial rush to absorb and model the impacts starts to wane, organizations are realizing that fundamental changes are required. New data is needed. New tax drivers exist. New understanding has to be found, and quickly. We can help address and alleviate challenges related to tax reform by combine analytics skillsets, tax domain knowledge, and technologies, leading to a deeper understanding of data for our clients.

Deloitte's integrated approach combines data management and sourcing, advanced analytics and data science skills, and extensive tax knowledge. Focusing solely on interpreting and applying the new law is not enough; organizations must deal with the complexities of sourcing new types of data, developing new forecasting models, tracking changes over time, understanding new tax drivers, and scenario planning with real-time data. Integrating data + tax + analytics will create a sustainable, and successful, long-term approach.

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Contact us to explore how a custom-developed, analytics approach combines tax domain knowledge, a deep understanding of your industry, analytics, and other tools to secure smarter insights and stronger outcomes for your team and your business.