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My data is a mess. Is tax data analytics out of reach?

Big data and tax: Data with purpose. Decisions with confidence.

As the world slowly starts to progress past the initial phase of the COVID-19 pandemic, the pressure on the tax function has been immense. The time is right to take the first step towards tax analytics. Data doesn’t need to be perfect to have impact. Tax data analytics can take the data you have—limited or disorganized as it may be—and turn it into insights that can help your tax department guide the wider organization toward increased efficiency and business success. Turn your tax team into the strategic partner your company needs.

Tax data analytics: Saving time, sparking insight

Your company is negotiating an acquisition. Negotiations have taken an interesting turn, and you’re tasked with providing your CFO (chief financial officer) with the impact on the effective tax rate of acquiring this business with complicated multinational operations.

With tax data analytics, you can incorporate new data elements, run multiple scenarios, and present an interactive dashboard to explore possibilities with the CFO in a matter of hours.

Without tax data analytics, answering the question could take days of sorting through data, building spreadsheets, and developing a model.

Imagining how a tax analytics solution adds efficiency and informs the corporate decision-making process could be the catalyst that’s needed to kickstart an analytics initiative.

However, many businesses put off taking the first step with tax analytics because they believe their data needs to be “near perfect.”

Perfect data isn’t a prerequisite

While businesses can always improve at collecting, integrating, and standardizing tax data, the data itself doesn’t have to be perfect to allow organizations to reap the benefits of analytics. Applying analytics solutions can even help improve data by identifying anomalies, misclassifications, or missing data sets.

Today, tax reform is bringing dramatic change to the tax world. Tax data analytics can help provide the insights that businesses need to understand its implications and make better decisions. The business is moving forward even if the tax law is evolving. Analytics can help navigate the uncertain waters and enable data-driven decision making that embodies what’s possible when humans work with machines to amplify one another’s impact.

The time is right to take the first step into tax data analytics—use the data you have to help make the case and grow analytics from there.

Even limited data sets can be used to help make valuable observations or predictions. In the acquisition scenario detailed earlier, you had built an analytics solution that focused on the key drivers of your effective tax rate but allowed a flexible input model to allow for complex scenario planning. When the use for the solution pivoted to a new acquisition, you were ready to quickly respond.

Bringing together big data and tax

Tax data analytics combines tax technical knowledge and advanced information technologies to identity patterns and anomalies. It can help organizations change the way they think about tax issues and how tax implications impact business strategies.

  • Streamline processes and add efficiency. Improving day-to-day operations through analytics and automation free up time for more strategic thinking.
  • Improve data quality. Analytics improves data quality by identifying anomalies, outliers, and unexpected results.
  • Inform scenario planning. Scenario planning driven by analytics allows companies to compare different tax scenarios, isolate key drivers, and model different options.
  • Facilitate better communications. Descriptive analytics or dashboarding help tax professionals communicate complex concepts.

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Analytics insights lead to more accurate returns

The tax department of a manufacturing company is using a state apportionment model and analytics solution that can be utilized throughout the year. It can run scenarios to better understand the state tax impact of changes in the business and validate apportionment information throughout the year. When relocating major warehouse operations to another state, the tax department wanted to understand the shift in state tax. Not only could they see the future impact of the move, they noted that while payroll was no longer being sourced to the old state, the former state was incorrectly showing fixed assets. This insight allowed the tax department to notify the finance team so the asset ledger could be adjusted before year-end.

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How to take the first step

Every business approaches their tax analytics journey in a different way. At Deloitte, we help our clients understand their unique challenges and develop an approach that suits the goals and the current state of the organization. There’s no “one size fits all” solution, the only requirement is realizing that your data doesn’t have to be perfect to get positive results, then taking that first step. An enterprise-wide ERP transformation is not required, tax departments can get started with tax return, and tax planning using the data that they have today.

Tax data analytics is a part of a continuous effort that can help deliver greater tax insights, increase business revenue, understand and manage tax liability, and drive profit and shareholder value. Taking the first step can be the most challenging, but the rewards can be transformational.

Here’s our approach to getting started with analytics:

  • Think big. Identify potential opportunities and look for areas with data from multiple sources, large amounts of data, significant time required to manipulate data, recurring analysis is required, scenario planning, and history of challenges.
  • Start small. Prioritize opportunities based on value, risk, and ease of implementation.
  • Act fast. Start with a proof of concept to help socialize the benefit, identify hurdles and risks, identify available resources, and educate others on tools and change management.

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Start putting your data to work

Deloitte provides tax data analytics solutions that are purpose-built for your circumstances, enabling you to address the specific challenges your tax department faces. We combine our deep tax knowledge with our hands-on experience across a range of data collection, wrangling, and analytics tools to help you deliver insights with efficiency and lead your team into the future with clarity.

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