How to build data-focused tax compliance
January 13, 2021
Tax departments are under more scrutiny and pressure than ever before. The regulatory landscape is complex, tax authorities are using technology to improve enforcement, and businesses demand more analysis and insight. And there is the ever-present need to do more with less and drive down costs and turnaround times.
Companies must also have greater operational resilience to deal with the current wave of uncertainty and disruption. From a fast-changing regulatory environment, to tech disruption, to the COVID-19 pandemic and Brexit, tax functions need to be able to respond swiftly and use the valuable data they have to help the business.
Simply maintaining business as usual is no longer enough (and this is difficult enough in itself). Tax functions must gather data, model scenarios and provide decision makers in the business with the information they need to weigh up risks and ensure compliance and peace of mind.
Data is at the heart of modern tax compliance. The ability of tax departments to take advantage of technologies such as automation and tap into new skills will be essential if they are to make better use of the data they process and tackle these challenges.
Compliance itself remains a core function and tax departments need to rethink their approach to keep pace with the greater use of analytics and AI technology by tax authorities. For example, HMRC’s Connect data analytics software not only collates traditional data that companies and individuals provide, but also uses publicly available information from sources such as social media. This has helped HMRC collect an extra £4bn in tax during its first four years of use.
By extracting data more efficiently and automating the compliance process, tax teams can then put this data to multiple uses and provide the value-added analysis that business now demands. Better use of data also allows tax functions to not only ensure compliance but also increase transparency and demonstrate that their tax approach is aligned to the business and social purpose.
How can tax functions achieve all this? Through clever thinking and using readily available technology and tax expertise to solve these data issues and meet modern compliance needs.
For example, one client reduced the amount of data that had to be manually reviewed—over 10,000 lines—by around 90% using our automation technology to remove and match all contra entries in minutes instead of days. And another client collated data from multiple sources into a single repository and automated 85% of its tax analysis with the click of a button—all while retaining a full audit trail and improving quality and efficiency.
A key question is whether these new approaches are best delivered in-house—if that’s possible—or whether more flexible sourcing that brings in external expertise is a better way to access these technologies, skills and expertise. There is no one size fits all right answer and for some businesses building new, automated, tax processes in-house will be the best answer. For others outsourcing some or all their tax delivery needs will allow them to both ensure compliance and solve their data problems. Outsourcing gives access not only to highly experienced tax compliance specialists but also to technology, processes and analytics capabilities which may be expensive to replicate inhouse. These allows the businesses’ tax team to focus on utilising the new data insights that they obtain.
It’s time to rethink your approach to tax compliance and it is all centred around making data work for you.
You can watch our latest tax compliance webcast to find out more.