Before making significant financial investments in automation technologies, businesses must make sure they thoroughly evaluate the technology options on the market.
According to tax directors, companies should view technology as an investment in streamlining their reporting and compliance procedures rather than merely as an expense.
The calls come as a result of multinational corporations having to deal with more onerous real-time reporting and electronic invoicing rules being implemented by tax authorities.
Before making significant capital investments, firms should investigate the technological alternatives available in the market, according to a tax specialist at a multinational telecoms company in the UK.
"[Effective] technology adoption cannot happen without someone in-house monitoring what solutions are available to taxpayers," she noted.
She claims that because of higher VAT, e-invoicing, and live reporting criteria, businesses are under more pressure to employ automation systems.
She continues, "Businesses need to see technology as an investment to improve processes and the quality of VAT submissions."
Companies are simultaneously given access to a wide range of sophisticated automation technologies.
Access to funds and having qualified people are two important obstacles that organizations must overcome when investing in technology, she continues.
It frequently takes a sizable commitment of time and money to choose and apply automation technologies.
According to the telecommunications tax expert, there are constantly new technological solutions available due to the regular changes in tax compliance regulations.
Businesses must develop specialized positions devoted to surveying the industry and advising on the finest technologies available in order to meet these issues.
This would aid businesses in avoiding the pitfall of spending a lot of money on solutions without performing extensive and in-depth technological due diligence.
When selecting the appropriate equipment, businesses must also consider their budgetary limitations.
"Even if you have the human resource to manage the adoption of new solutions, without sufficient budget to purchase technology, it’s just not going to work," she continues.
Companies must change the way they see automation, moving away from perceiving it as an expense and focusing instead on it as a long-term investment.
According to a tax expert at a Swiss metal processing firm, taking a lean approach to allocating resources for resolving IT and technology difficulties might be counterproductive.
"Like a boomerang, your project [issue] is soon back on the table, so six months or a year later you have to make another quick fix solution [to resolve things]," she continues.
According to her, companies should preferably seek for long-term solutions that make it possible for tax operations to remain compliant for at least 18 months after the first expenditure.
This means that businesses should select solutions that offer the broadest compliance coverage and the longest-lasting coverage for them.
Without a doubt, tax directors cannot account for every conceivable scenario. This frequently results in their having to catch up with system and regulatory changes.
A tax expert in Switzerland adds, "There are always unexpected changes in the law."
According to her, there are instances when the ideal automation solution is not the simplest one, but rather the one that offers the highest long-term value and addresses the greatest number of business concerns.
It is not always under the tax team's control, according to Benoît Labiau, head of tax and treasury for EMEA at the medical technology business Terumo Europe in Brussels.
According to him, there may be a lot of conflict inside organizations due to the tax operations' reliance on IT teams.
"Sometimes things will urgently need to be resolved and everyone will be complaining about the IT department for not doing so. But maintaining clear communication with IT is key," according to Labiau.
This can occasionally add to the burden on the indirect tax department, especially when they require technical assistance or technology for audits.
According to Labiau, complaints can come from both sides, with IT expressing dissatisfaction with the inadequate warning given to them when tax officials implement legal changes.
This frequently puts more pressure on internal teams to provide short fixes that meet urgent demands than to provide long-term answers.
"Sometimes it’s difficult for IT teams to understand that the [tax] law changes so fast in different countries. It requires time to explain and to understand the IT team’s constraints," according to Labiau.
These quick changes frequently conflict with the strategy used by technical departments, which frequently strive to execute long-term technological expenditures.
Teams working on indirect tax and IT frequently miscommunicate on important issues. This frequently happens as a result of conflicting company objectives and functions.
While indirect tax teams want to function according to long-term goals, the truth is that they are frequently too busy employing short-term techniques to put out flames on many sides.
According to Labiau, in order to appeal to technical departments, tax teams should strive to speak their language.
According to Labiau, "sometimes you need to work with your IT department in a more agile way."
This strategy occasionally succeeds in assuring that IT can comprehend the operating procedures of tax functions and that they react appropriately.
Technology solutions are not inexpensive. To execute them frequently requires large time, human, and financial inputs.
Some well-funded businesses have been able to pay for complete tax function automation.
However, the majority of businesses continue to battle with a variety of out-of-date technologies, including the usage of Microsoft Excel.
As a result of the possibility of human mistake while completing manual inputs, this raises the risk profile for businesses.
The tax expert in Switzerland continues, "Sometimes IT tells me that if I can do something in Excel then I need to keep doing it." This is in reference to manually entering data into systems.
This basic discrepancy in risk assessment between the IT and tax teams emphasizes the disparities in methodology.
Tax technology and automation, according to a tax director of a large multinational in Dubai, are essential for contemporary tax departments.
"Technology is not a nice to have, but a must have now," according to him.
Even while tax teams may be eager to invest in technology, top management and technical teams still need to support them.
Tax directors frequently have to make the tough decision of either investing in currently offered automation options or holding off till more cutting-edge technologies are released. On occasion, this might paralyze the operations of indirect taxes.
The tax expert in Switzerland continues, "The question is do we continue to operate in Excel or do we proceed to automate what is possible now using SAP S/4 HANA."
According to a tax director of a multinational energy firm in the US, businesses that wait for the ideal time to invest in technology risk having to wait a very long time.
He continues, "Waiting to see what happens is never a good approach."
According to him, organizations that put off investing in new systems are readily surpassed by new laws and technological advancements.
While it may be true in other professions that good things come to those who wait, tax directors would be wise to seek to reframe technology as an investment in the future of their organization and make the case for its quick adoption.
By fLEXI tEAM