Navigating Tax Complexity

In an iconic scene from Mission: Impossible, Tom Cruise enters a highly guarded vault hanging upside down from a ceiling cable so as not to touch the floor and trigger a myriad of alarms.

Financial professionals navigating today’s tax rules can sympathise. Tax regulations are constantly changing and with the ongoing responsibilities of compliance, risk management and data management efficiencies, it’s a demanding space to be in.

But there are many effective ways to make tax a mission entirely possible.

In a recent CFO Magazine A/NZ Lunchtime Live WebCast, a panel of leading tax professionals discussed the benefits of taking a data-driven approach and incorporating tax technology to improve efficiency and effectiveness.

Here, Alice Han, Proposition Manager, Thomson Reuters, Sharon Arasu, EGM Tax, Treasury, Risk & Systems, CAR Group and David Beves, Partner Corporate Tax, Nuwaru, shared their insights into ensuring organisations are well-equipped to navigate the complexities of the tax landscape.

Today’s regulatory landscape

As we head into another reporting season in 2024, it is important for organisations to be aware of what the ATO is targeting as well as staying current with tax trends and regulations.

It’s pushed many businesses to trade legacy systems for new technology platforms. A survey by Thomson Reuters found 40 per cent of C-suite executives said the global push for tax transparency had sped up their digitisation plans.

“From a Thomson Reuters standpoint we’ve seen a lot of our clients with the global push for tax transparency has really increased and accelerated the digital transformation,” Han said.

“A lot of the sentiment about it has been cautious and fearful in the past, but now we’re looking towards more optimism and how technology can really bring about change and value to current processes.”

Like tax regulators the world over, the ATO is continually trying to ensure organisations are not shirking their tax obligations. Adopting tax technology has the dual benefit of keeping data well organised and easily accessible, as well as creating efficiencies at tax time.

“Data is really key as it always is with most processes, specifically for tax and that’s not just for systems – making sure you’ve got accurate corporate history and understanding how your transactions in the past have been conducted is key, so that’s been a big focus for the ATO,” said Beves.

“From a technology standpoint, I think it’s probably fair to say that the ATO is certainly viewing taxpayers who have tax systems in place in a better light than perhaps those who have traditional systems like Excel. Through the justified trust program that they’ve adopted in the past couple of years what they’ve done is sought to understand taxpayers’ businesses in greater degree and detail and viewing the whole system as one to again get an understanding of the taxpayer’s business.

“The regulatory landscape coupled with a pretty heavy penalty regime specifically for large business is a really challenging landscape to deal with.”

The digital transformation in tax management

In a live poll taken of the over 200 CFOs and heads of Tax viewing the webinar, 43 per cent said they expected their organisation to spend more on digital transformation in the next 12 months. Conversely, 34 per cent expect their organisation to spend less.

Most organisations can fit into one of three categories when it comes to adopting digital solutions, Han said.

At either end of the scale are the late adopters, reliant on spreadsheets and human interactions, and the pioneers, who are exploring advanced technology such as open application programming interfaces (API).

Sandwiched in the middle is the bulk of organisations who have adopted technology and are getting to grips with the transition.

“It really doesn’t matter where you start, it’s looking at an assessment of where you are currently and what you’re looking to achieve,” Han said.

“Is it automation? Is it streamlining workflow? Or centralised data? Or do you want to have a solution that looks after the content for you and you can have trust in it?

“Because at the end of the day we’re worried about transposition errors, we’re worried about those minute errors because those are actually the things that are keeping people up at night more so than job security we found in our latest report.

“It’s about having the systems in place and looking at the purpose-built content driven technology that really sets you up for success.”

Actioning a shift to technology

Making the change away from old tech such as Excel is always going to be challenging. People are understandably reluctant to let go of systems they’ve known and trusted for many years.

“Whenever you have change, your first pain point is going to be change management,” said Arasu. “It’s getting people to agree that if something’s not broken to change it. That I found, is the biggest pain point.

“The second one is people feel you are taking control away from them whenever you automate. They feel they’re losing control and ‘the machines are taking over’.”

Leaders can build business cases around adopting tax technology by getting stakeholders on board. Arasu recommends proposal strategies that offer mutual benefits.

“Assess where you are now and where you want to be – what’s stopping me from doing that – the pain points and the solutions,” she said.

“Justify the spend on technology. Who do I need to get to back me to invest in the technology? “Understand their pain points so you’re not going to them with a problem, but a solution.”

Organisations don’t often have a lot to spend on tax transformation, so justification needs to be strong and the transition will most likely be gradual.

“A lot of this stuff will be evolutionary rather than revolutionary,” said Beves.

“Really understanding where you’re at on that journey and having a roadmap to the future for your tax function is really important. Not to only be able to explain to your team where you’re headed from a technology standpoint, but also to your stakeholders, both externally and internally.

“Because we all know there’s a lot of change going on around us and so I think being able to communicate that to the people that matter to you most is really key.”