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Indirect tax analysis and recovery
Analytics offers a new and better way
Today many indirect tax operations remain in a hindsight position, manually or semi-automatically mining disparate data sources to understand historical tax positions. Explore the potential benefits from the use of tax data analytics.
Almost every transaction a company conducts involves indirect taxes, regardless of whether the company is a buyer or seller. Indirect taxes also affect both cash flow and bottom-line results, and as companies grow and enter new markets, indirect tax collection and reporting requirements expand as well. With numerous tax types and jurisdictions involved, the process of fulfilling these obligations can become one of an organization’s most voracious consumers of financial data.
The surging demand for indirect tax data highlights the growing importance of data analytics in understanding organizational tax obligations and preparing accurate, complete returns. This article discusses the evolving role of analytics in addressing indirect tax requirements and current approaches to indirect tax management. While focused largely on tax regimes in the United States, it examines an innovative, technology-enabled, and data-intensive approach to fulfilling reporting requirements, reducing risk, and potentially increasing indirect tax recoveries that can be applied to any indirect tax regime.
Download this article to learn about the evolving role of analytics in addressing indirect tax requirements and current approaches to indirect tax management.
How data analytics can transform indirect tax compliance and recovery
Tax data analytics combines tax technical knowledge and advanced information technologies with large sets of master data and transactional data to identify patterns and anomalies. Leading to deeper insights and greater understanding, tax data analytics can provide an array of benefits from uncovering errors, improving cash flow, and prioritizing indirect tax focus areas.
Indirect tax data analytics benefits
- Provides opportunities through the record to report process
- Offers visibility into business scenarios
- Provides a complete view of a full population of transactions
- Manages risk
- Allows users to quickly prioritize high-impact areas/jurisdictions
- Allows root-cause analysis of data and systemic errors
- Improve cash flow
- Supports proactive data analysis
- Reduces errors
- Permits users to quickly drill into the data in different ways through multiple cuts of data
Change the mindset from “what I need to do” to “what I need to know”
Analytics can provide hindsight into historical tax positions and insight into current obligations. In advanced forms, analytics can provide foresight into “what-if” changes in tax conditions and liability and even indicate potential risk areas.
A logical starting point for the application of analytics is the enormous amount of existing data within the tax department. New tools can provide great insight into this information.
Current indirect tax audits can be used to prototype an analytics dashboard and demonstrate its value. Next, look across the enterprise to identify other analytics initiatives already underway — for example, in procure-to-pay or order-to-cash cycles.
Explore where tax can tie into these efforts and tax analytics can be integrated into the overall organizational analytics scheme. Engage IT to identify analytics platforms that tax can perhaps benefit from.
A new view of indirect tax
Indirect tax is a major enterprise expense, and managing it well is vital to cash flow and the bottom line. Data analytics technology offers powerful, promising new tools to help capture an accurate picture of liabilities, develop strategies to reduce overpayments, and even identify potential opportunities for tax refunds.