The greatest approach for tax departments to increase productivity and lower compliance concerns, according to experts, is through technology and automation technologies.
Experts advise businesses to concentrate on new technology so that tax departments can handle the increasing demands of tax compliance, especially in light of the regulations governing digital tax reporting.
At the pharmaceutical business Lupin India in Mumbai, Mohan Nusetti, senior vice president and head of indirect tax, says tax teams are under increasing pressure to increase operational effectiveness and reduce risks.
According to Nusetti, "tax authorities are demanding data that is more and more current—sometimes even real-time."
According to him, businesses are increasingly using off-the-shelf technological solutions to meet e-invoicing and statutory tax compliance needs.
According to Gorka Echevarria, worldwide VAT leader at Geneva-based Lexmark, a manufacturer of laser printers, businesses must invest in technology if they hope to comply with regulatory requirements.
"During audits, if they [businesses] show authorities they are serious about upgrading their compliance game with powerful tools, they’ll be able to see the investments pay off," adds Echevarria.
He claims that organizations that employ automation in their operations to strengthen their tax controls are more trusted by tax authorities and auditors. As automated solutions become the standard, this is not likely to alter in the future.
There are many of technological options available on the market for tax directors. However, choosing the appropriate tools for their businesses is where the true difficulty resides.
When investing in technology, multinational corporations typically have to choose between two tactics.
On the one hand, taxpayers may make an investment in a general fix that would apply to all of their enterprises. An ERP system or a tax engine, such as tax computation software, may fall under this category.
On the other hand, international corporations may decide to delegate automation choices to groups in certain countries that are often well-versed in the relevant standards.
According to Echevarria, tax engines can make managing the VAT computation easier, especially for accounts payable processes. By doing this, teams in charge are relieved of the tedious task of manually assigning tax codes to vendor bills.
According to Echevarria, "Tax engines offer a more reliable and solid way to push VAT rate changes that don’t require multiplying tax codes every time rates move up or down."
In the US, where businesses have discovered them to be vital, these tools have also proven to be particularly well-liked.
"Managing indirect tax calculations in the US is mission impossible without such tools [tax engines]," claims Echevarria.
He claims that despite the tools' shown value, some companies are hesitant to introduce them in regions of Europe, the Middle East, and Africa because of the potential financial consequences. Later on though, they quickly realize the chance they missed.
One program that his company employs has emerged as a well-liked solution for transaction-level reporting requirements, according to a tax head at a multinational luxury products company in London.
The tax leader claims that "It includes all the controls to make it a reliable one-stop-shop [solution]."
In addition to tax engines, businesses do have additional automation choices. Utilizing ERP system add-ons to manage VAT computations is one such option. However, this might take some time because it calls for knowledgeable experts who are committed to producing correct data.
The tax leader claims that automation decreases risk by minimizing the need for manual intervention and saves time on more routine compliance tasks.
Many nations are experiencing recessions at the same time that there has been economic unrest, including a global surge in prices. Companies are becoming more resource-conscious as a result of these considerations.
The adoption of add-ons appears to be the most effective approach for multinationals to fulfill specific compliance needs across their many countries, according to Robert Jaszczuk, partner for VAT consulting and compliance at tax law consultant SSW Pragmatic Solutions in Warsaw.
He asserts that the majority of CFOs and tax executives would want to automate their compliance requirements with a single system, but he adds that "these tax engines are not fully adjustable to every country's specific VAT laws."
According to Jaszczuk, Poland's indirect tax legislation include subtleties that make it difficult for SAP and other international ERP suppliers to integrate them without the use of add-ons.
These specifications include the need to confirm that the bank information used by companies to pay their bills corresponds to the register maintained by the Polish Ministry of Finance. If this were not done, both the supplier and the buyer would be held jointly and severally responsible for the VAT.
According to Jaszczuk, "They [tax engines] don’t cover these kinds of automated processes and, therefore, we can’t have one system which fully aligns with every jurisdiction."
Lack of standardized standards across the EU and the rate of real-time reporting rule adoption across the single market are two further factors that have made it more challenging.
Due to this divergence, businesses must have a core ERP system that is highly customized to meet the requirements of each nation.
One option for the majority of firms is to spend money on either a worldwide tax engine or an ERP system that handles the majority of company tasks but is highly customized with add-ons for regional specifications.
As an alternative, firms may spend money on specialized tax engines that target certain industries and their business models, such e-commerce or electronic enterprises.
According to Jaszczuk, "local suppliers are able to provide add-ons that provide a bridge between, for example, a global SAP system and requirements in each country."
The global luxury company's tax chief lauds the value of Alteryx's data analytics and process automation technologies.
Siemens India's director and head of indirect tax, Vikas Garg, claims that his company has also experimented with Power BI and Qlik Sense in its operations.
It seems that the speed of technology advancement is encouraging businesses to experiment with other solutions.
To handle the load of compliance, businesses are also utilizing more sophisticated solutions. Among these are automation solutions designed to alter tax and data operations.
According to Nusetti, compliance processes are being improved by using robotic process automation, software that automates high-volume, repetitive operations, in place of human input.
According to Nusetti, "the speed, accuracy and capacity of these technologies has aided in freeing people’s time to focus on strategic activities."
Automating large-scale tax data is becoming more common. For the purpose of streamlining the acquisition of purchase tax credits, companies are now resorting to optical character reading and machine learning.
According to Nusetti, "tax analytics are being extensively used to identify tax risks and to plug revenue leakage."
The variety of technology possibilities was formerly constrained, however this is no longer the case. Tax leaders frequently have more options than they can handle as a result of the expansion of technological options.
It is evident that companies must use automation if they wish to keep up with the numerous regulatory changes coming from various jurisdictions. Many people may future-proof their organizations and remain ahead of the compliance curve by making technological investments now.
By fLEXI tEAM