Could your tax function benefit through investments in tax technology?
- Are you confident in the accuracy and completeness of your company's tax numbers and your ability to defend them?
- Do you have good visibility over the tax affairs of your company worldwide?
- Is your tax team able to manage the complexities of dealing with income tax, VAT/GST, transfer pricing, and other regimes in all of the countries in which you operate, now and in the future?
- Are routine compliance and reporting activities taking up too much of your tax team's time?
- Are you able to access and derive value from the mass of tax data across your international group?
If you answered "no" to any of these questions, tax technology could help you turn things around.
Compliance takes time
Compliance-wise, Latin American tax regimes are notoriously difficult. In Brazil alone, for example, companies need to manage over a myriad of different taxes while ensuring that they do not miss out on a confusing array of targeted tax incentives and subsidies for investments in certain locations and activities. As Iberoamerican companies venture into more markets, their tax compliance obligations will multiply and their tax teams will need to undertake more sophisticated tax planning in a complex international context.
A company's growth can also aggravate the usual tax department challenges. As the company expands, both the need for resources to manage overseas compliance and the amount of financial data needed for tax reporting will increase. At the same time, that data becomes more far-flung and harder to retrieve. Further, many global companies are creating shared service centers for their finance functions, creating central locations for all of their transaction processing. While centralization benefits the finance function, the job of local tax professionals may get harder when all of the tax data they need is stored in a country that may be many miles and time zones away.
Freeing up time for value-added planning activities
How can technology help? Automation and standardization eases the management of complex data flows, streamlines the performance of routine tasks, and increases the accuracy of tax data and related filings. Greater efficiency results, allowing in-house tax teams to spend less time on compliance work and more time adding value through proactive tax planning activities.
Specific examples of how investments in tax technology—such as KPMG Link 360—can pay off are as follows:
- Easier preparation of tax provisions and year-end tax reports. Organizing the performance of these tasks takes a huge effort, even more so for companies that still rely on email and spreadsheets to gather data. By ensuring local data is standardized and creating better audit trails, technology can help cut the costs and tax professional time involved in preparing tax provisions and year-end tax reports.
- Greater visibility of tax activity. For growing companies, local tax data regarding cash flow, effective tax rates, and tax risks is crucial for effective centralized tax and regulatory planning. By using web-based technology to capture local data, companies can bring more structure, collaboration and communication to their tax planning activities. The more sophisticated understanding that results will help tax teams develop more informed business decisions.
- Global management of specific tax areas. A single, global platform that can meet all of a company's tax reporting and accounting needs remains the holy grail of tax technology. Even still, a wide range of strong tax software packages designed for one or two specific purposes is available. As discussed on pages 23–31, these technologies can provide solutions for managing complex international tax issues, such as a company's transfer pricing, employee relocations, and VAT/GST obligations, in each of the company's locations.
Keeping up with the tax auditors
Tax authorities are realizing the benefits of technology in their audit and enforcement activities. Around the world, tax auditors are using increasingly sophisticated data analysis techniques to target their audit
efforts, and companies may need to upgrade their systems to comply with related IT requirements. For example, the United Kingdom now requires corporate tax returns and statutory accounts to be filed under the XBRL electronic reporting standard (see sidebar).
Making the case
Implementing new technologies requires a huge investment. Tax directors need to build a solid business case to convince their company's upper management of the expected returns. To make a persuasive pitch, tax directors can use two arguments. One argument emphasizes risk and governance, highlighting how technology can greatly improve the accuracy of and control over tax-related data. The second emphasizes opportunity costs, highlighting how resources currently expended on low-level compliance can better deployed to planning activities that generate value.
Accessing technology's benefits by outsourcing
Rather than investing in technology, many companies decide to outsource some or all of their compliance activities to third-party service providers. By outsourcing, companies can bypass the need to implement complex, company-wide IT systems and gain access to skilled resources, improved technology, and better practices. As the sidebar below shows, outsourcing can offer particular benefits for companies that need to deal with new local tax obligations as they expand into different countries.
In summary, to respond to regulatory and business pressures, manage risk and achieve high performing teams, tax functions can benefit by giving greater priority to investments in enabling technologies. Only those businesses that proactively respond to the new tax landscape can expect to mitigate risk and be best placed to capitalize on the emerging opportunities that the future will bring.
KPMG Link 360
In the increasingly complex and demanding world of compliance and reporting, having visibility over your global tax processes and data is essential. Locally, it enables your teams around the world to operate with consistent standards. Centrally, it gives you effective monitoring and control and demonstrates strong corporate governance to auditors and tax authorities.
KPMG LINK 360 is a web-based information hub that helps you capture and maintain visibility over your tax processes, document files, and data wherever they are managed or originated. Among its many benefits, KPMG Link 360 offers:
- The ability to better define and structure data gathering across your business in advance, improving
efficiency for service providers and users all-round
- The flexibility to tailor outputs to meet the specific reporting needs of multiple interest groups
- A modular approach, allowing KPMG Link 360 to respond to change and align the tax function more closely with the developing shape of your business. By providing a single platform accessible to your staff and third-party service providers, KPMG Link 360 gives transparency over your tax management processes and access to information and data files when you need them.
XBRL – a global approach to electronic business reporting
Tax authorities around the world are investing in technology to improve their efficiency and fine-tune their audit targeting methods. In the United Kingdom, for example, HM Revenue & Customs has mandated the filing of UK company accounts and corporation tax returns in XBRL (eXtensible Business Reporting Language) format – a web-based computer language written specifically for electronic business reporting.
Adopted by regulators in over 25 countries, including the United States, Japan, Australia, Belgium and Netherlands, XBRL could eventually become the international language for business reporting. Many of the world's tax authorities are looking into its possible benefits. Tax information filed in XBRL format can be stored a database that allows tax authorities to run immediate comparatives between year-ends and between companies within similar sectors. Statistics and variances can help direct tax auditor's investigation and enforcement efforts.
To comply with XBRL requirements, companies will need to reengineer their in-house accounting processes and set up systems capable of producing tax data and company accounts in XBRL format.
Even though tax functions in most countries do not need to use XBRL for compliance yet, embracing the new standard could be an advantage for companies operating across many jurisdictions. The format presents opportunities to standardize and streamline internal reporting processes across locations, and taking a global approach for XBRL implementation could lower the eventual cost of bringing all jurisdictions onto the new standard.