Managing the data wrangling challenges of Pillar Two

How tax data systems can support compliance

As organizations navigate the challenges of Pillar Two compliance, they face significant administrative burdens that can have an impact on their ability to meet reporting and regulatory requirements. To shed light on these challenges, a webcast, “Global minimum tax (Pillar Two) with Oracle’s TRCS—the how and what!” was conducted on June 20, 2023, during which the webcast attendees were asked to identify the most significant administrative burden they face. (Note: Oracle’s TRCS has since been renamed Oracle EPM Tax Reporting.) The results show that data gathering and wrangling emerged as the top concern, reflecting the complexities involved in managing the vast amount of data required for compliance.

All eyes on Pillar Two: global tax compliance challenges

The implementation of Pillar Two rules is gaining momentum globally. The EU adopted a directive on December 22, 2022, which will require all member states to implement Pillar Two rules starting in 2024. Additionally, Canada, Australia, Japan, South Korea, and Switzerland have also announced their intention to implement the regulations or have already adopted legislation.

The immediate focus for many companies is understanding and complying with the safe harbor guidance introduced in December 2022. The safe harbor provides some relief and simplifies compliance procedures, and many companies are currently prioritizing this aspect.

Pillar Two implementation has gained significant attention and focus, especially among US-based multinationals. Many companies are now educating themselves about the rules, modeling the potential impact, and formulating long-term strategies.

Addressing data wrangling challenges in Pillar Two tax compliance

When attendees to the global minimum tax webcast were asked to select one of five options indicating their most significant administrative burden—data gathering and wrangling, financial reporting, computation, compliance, or “not applicable”—41% of respondents identified data gathering and wrangling as the most significant administrative burden. This finding underscores the critical role of efficient data management in ensuring reporting in compliance with Pillar Two regulations.

Data gathering and wrangling involve collecting and organizing various types of data, such as financial information, operational data, and transfer pricing data, from multiple sources within the organization. This process often requires consolidating data from different systems and formats, which can be time-consuming and prone to errors. The webcast poll results highlight the need for organizations to develop well-rounded data management strategies and implement tools and technologies that streamline data gathering and ensure data integrity.

Insights into tax data systems and tax reporting tool adoption

In addition to understanding organizations’ concerns, the polling questions also explored the landscape related to tax reporting and compliance. Webcast participants were asked to indicate their current system landscape based on various options, including the use of Oracle EPM tax reporting. The responses provided insights into the adoption and plans for implementing Oracle EPM tax reporting within organizations.

Among the respondents, 11% reported currently licensing Oracle EPM tax reporting, indicating that they have already invested in this solution. Another 10% mentioned that they are in the process of implementing or using tax reporting for tax provisioning and/or country-by-country reporting. These figures demonstrate that a notable portion of organizations recognize the value of tax reporting in managing their tax compliance processes.

Furthermore, nearly 10% of respondents stated that they are currently preparing tax provisioning using spreadsheets and are considering adopting tax reporting. This group acknowledges the limitations of manual spreadsheet-based processes and is exploring more efficient and reliable alternatives. Another 21% indicated that they are not considering tax reporting at the moment, suggesting that they may have already implemented alternative solutions for tax provisioning and reporting.

The webcast poll results highlight the importance of efficient data management and the adoption of appropriate tax reporting systems for Pillar Two compliance (but currently not there yet). Organizations need to address the challenges associated with data gathering and wrangling to streamline their compliance processes and ensure accurate reporting.

Conclusion: better data management helps address Pillar Two tax compliance challenges

As companies continue to navigate the complexities of Pillar Two compliance, it becomes increasingly clear that robust data management practices and adopting suitable tax reporting solutions are vital for success. Organizations can overcome administrative burdens by leveraging technology and empowering employees to effectively meet their reporting and compliance obligations.

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