Internal tax function has become a crucial cog in the operational machinery of an organisation.
As today’s business model is becoming global and the processes becoming increasingly complex, internal tax function is becoming a crucial cog in the operational machinery of an organisation. Regulatory and compliance pressure is on the rise and so is the need to efficiently process information from myriads of sources for computation, analysis and publication of tax information. In parallel, business is also demanding utilities and mechanisms to gain insight into the Tax bill and searching for ways to reduce them. What are the challenges that tax teams are facing today?
- Data sources are diverse, which needs to be integrated and consolidated for analysis
- The veracity of the source data is questionable, which needs days of dedicated work to clean and perfect
- Establishing the association of data from different sources in order to generate meaningful insight is painful, non-standardised and subject to human errors
- Critical information like tax liability, high risk activities and litigation status are not available on a real time basis
- Scenario analysis for tax liability prediction is limited by time, data and human resources
- Inability to track the tasks, risks and to monitor the progress at a granular level
- Ad-hoc storage of relevant documents and information increases time to respond
In order to overcome these challenges organisations should look at sophisticated technology solutions which will not only be able to address these issues but also will make tax function lean, efficient, error free and cost effective. The basic components of such a solution should achieve the following:
Enterprise data warehouse: This should be a “One Stop Turn Key” component, which will bring all the data from different sources, formats and taxonomies into a central repository. It should contain in-built ability to cleanse the data, perform intelligent validations either through rule driven routines or manual intervention. The solution should have the ability of information mapping, adjustment, allocation and finally generate all the necessary reports that are required for internal and statutory purpose. It needs to provide reconciliation views, which will enable the business to identify inaccuracies in return filings. It also needs to have a reporting engine which can be used to generate structure and ad-hoc reports on the fly as per the need.
Analytics capability: In order to plan for the possible future scenarios and to create rules for better tax planning, an analytical platform is an essential component in the tax technology landscape. This solution should allow the team to create various statistical models, do forecasting as well as create and test hypothesis in order to arrive at the right combination of rules and formula for tax saving. The platform should also provide the ability to generate insight on the organisation’s internal processes, bottlenecks, possible improvement areas, market trends across various dimensions and parameters.
Document management: Nowadays, most of the organisations are already using DMS software document storage. For tax purposes this utility needs to be augmented for archiving all the relevant information with appropriate taxonomy and access control. Document updating process needs to be guided by a rule driven workflow. Litigation information needs to be captured along with the documents, their journey through various stages needs to be linked and proactive alert mechanism needs to be implemented for actionable items. The interface of this system needs to be driven through a portal in order to facilitate storage, search and retrieval of information as well as managing the individual tasks. Collaboration, being one of the key enablers for efficiency in the modern world can also be integrated in the portal to facilitate sharing and effective participation of the team members.
Automation framework: Finally, in order to manage the end to end processes across various work streams that are necessary for tax management, an automated process management platform becomes the key to hold all the pieces together. Whether it is corporate tax, VAT, transfer pricing or any organisational processes, this template driven framework should be designed to manage and monitor all the activities, tasks, individual responsibilities, target setting, response time, risks and various other parameters. It should provide personalised dashboard to individual users containing reports, performance data, their responsibilities and assignments. The underlying workflow engine should drive the tasks from one stage to the other and push out alerts, notifications and escalations at appropriate stages.
Different organisations have come up with various tools and products around tax technology. It is important for the organisations to seat up and notice the power the products in the market. However software products alone without the relevant tax knowledge will not suffice. Choice of the right partner with the appropriate technological and functional knowledge is going to be the key in the success of their journey to an efficient, effective, standardised and optimised tax management landscape.
Pawan Kumar S
The writer is executive director— Technology Consulting, PwC India
(With inputs from Saunak Ghoshal, associate director – Technology Consulting, PwC India)