Today we are at a turning point in tax. There are enormous issues affecting and disrupting our industry, so much so that at times it seems like the landscape is literally moving under our feet.
Digital strategy for your company
Tax departments of the multinational must be ready to understand the digital strategy for the company they serve. Every company is thinking about how to digitize their operations. Retailers are looking into the “Omni-channel” to gain more wallet share from their customers. Financial services companies are changing the way they interface with their customers with techniques often called Fintech. Digitization is impacting every industry out there. All of these changes greatly effect the supply chain and create opportunities and pitfalls if tax planning is not considered appropriately during this time of change.
Digitization hits tax departments in three areas:
- How you manage your own tax department – what resources do you need and what tools are out there for you to be more efficient
- How you interface with the government – many country governments are going right into the books and records and assessing tax and
- How your company does business – do you know how digitization is impacting your company’s strategy?
Your tax function must forever leave behind the age of Excel spreadsheets and move on to the new world of automation and digitization. When you look at pressures like doing more with less, government demands for deeper transparency, the potential for finance and tax authorities to make tax calculations that conflict, and the digitization of some tax authorities, it’s clear that technology is going to be our great enabler.
Every smart multinational today is examining their current staff to make certain they have tax technologists on board and that they are using the right computing and automation technologies to make certain they are efficient and ready for the changing tax environment.
Digital government trend – dealing with digital tax authorities
Multinationals also need to be sure they are ready for digitized tax authorities. Many countries have already mandated data transfer that offers real- or near-real time processing of tax data and liabilities. But the data format they require does not always sync with your current systems and processes. When they want real-time access to your transactions, you’ll need a system to gather, report and transmit appropriately.
Tax authorities are beginning to match data across tax types and potentially across taxpayers and jurisdictions in real or near-real time. They are moving toward mapping the geographic economic ecosystem in order to stop fraud and uncover errors. If your digital capabilities do not keep up with their vision, you may not be able to respond appropriately to the new electronic audit assessments. This could lead to tax function mayhem. We are also on the cusp of a world where tax data goes straight to the tax authorities without going through the tax department and without a tax return. Companies need to think through this as it is happening in several emerging markets.
Kate Barton is Americas Vice Chair, Tax Services at EY.