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Tax data analytics and country-by-country reporting
Just as revenue authorities are using analytical techniques to focus on higher risk taxpayers, multinational companies (MNCx) are using analytics for both hindsight into what has already happened and foresight to scenario plan alternative future strategies. Using analytics can help organizations gauge their readiness to collect and aggregate the data required for country-by-country reporting (CbCR) and identify challenges in data collection which need to be overcome in order to meet the 2017 reporting deadline.
Using data analytics to help prepare for CbCR
A global tax reset is underway. CbCR for MNCs with turnover in excess of €750 million is upon us. MNCs must file their first CbC report 12 months after the end of the fiscal year beginning on or after January 1, 2016. Just as revenue authorities are using analytical techniques to identify higher risk taxpayers, MNCs are using analytics to identify organizational challenges in data collection for CbCR requirements.
Tax analytics helps MNCs to risk assess their CbCR by simulating the analyses which tax authorities might generate. Performing analytics, on reportable historic data, highlights likely areas of tax authority or other stakeholder interest and provides an opportunity to proactively remedy areas of concern. If post-filing errors are uncovered by tax authority enquiries or inexplicable anomalies, potential monetary impact could result (due to audit adjustments) and the reputation of the tax function could suffer harm.