Navigating the Intersection Between Tax and Technology

Technology and automation is a high priority for businesses globally. For CFOs, one of the key questions through this process is how to manage the rapid digitisation of tax functions and navigate the crossroad between tax and technology. This was the focus of the discussion at a recent CFO Lunchtime Live webinar, in the Future of Finance series.

“The transformation journey is a great opportunity to evolve away from a business model that’s driven by an accuracy focus to emphasise the insights technology can deliver. Tech solutions equip the tax team to use their expertise to be ahead of regulators and help steer the business in the right direction,” said David Fox, VP corporates, Asia and emerging markets at Thomson Reuters.  

Fox noted this is particularly important in an environment of ongoing global regulatory change. “We expect the OECD to reform corporate tax in 2023. So, a huge amount of time and investment of energy in technology solutions and advisory capabilities need to be deployed to make sure throughout the course of 2022 and into 2023, organisations are ahead of those regulatory changes and in the best position for success.”

Sound foundations

Any tax transformation process must start by aligning the business’s tax requirements with major stakeholders’ expectations, including the IT team.

“It’s remarkable how many times we get to the latter stages of the transformation program and issues emerge that have not been raised upfront within the business, due to stakeholders not having been properly managed. So, you need that alignment upfront to reduce internal conflicts and challenges,” he adds.

Fox said using experienced advisers during a tax transformation journey is critical. “It’s essential to partner with organisations that can offer the right expertise both in an advisory as well as technology context. Bringing the right stakeholders into the scoping and business case definition stage of a project enables the right approach to be taken back into the business, with appropriate counsel from trusted partners and advisers.”

Working together

INPEX’s Australian General Manager Finance, Danny Gentili offered insights into how CFOs can better engage and partner with their technology teams to ensure a successful implementation. “Work with your tax, finance and other teams to introduce the technology slowly. Bring in citizen-based software so you can be the architect of your own reports.”

Fox noted the Thomson Reuters’ approach is to work collaboratively with business and its tax, finance, and technology teams. “Make sure everyone understands the business value proposition and the technology capability that underpins that.”

Deloitte tax partner Abs Osseiran agreed. “Engage early to bring the team on the journey so they see transformation as an opportunity. And remember partnering with the right people gets you the right outcome. So, talk to people who have implemented solutions in the past, including service providers and your peers.”

Keeping the tax office informed

Osseiran recommends bringing the tax team into the process early on to help navigate the ATO and its complexities.

“The tax team will need to let the ATO know an ERP implementation or other transformation process happening. They will need to make the ATO comfortable from a system perspective the new solution has been checked and they have validated it works. This is especially important with the indirect tax base because one mistake can impact millions of transactions. Getting it right the first time ensures there is trust, that you’re paying the right amount of tax, and that relationship with the ATO is ongoing.”

Global push for transformation

Fawmore Business Solutions’ senior consultant Sonia Kaur has first-hand experience of the tax transformation journey. She recently designed and implemented an end-to-end global tax and regulatory compliance solution one of the world’s leading mining and infrastructure solutions providers across 42 countries.

“CFOs have a lot on their plate when it comes to regulatory compliance and tax plays a big part in that. So, it’s critical to prioritise tax at the beginning of any transformation,” she recommends.

Kaur says it’s essential to capture governance processes at the source and integrate them with the organisation’s operational processes. “This means having conversations early with the supply chain and procurement teams, because they all create taxing events. The last thing you want is your financial and tax teams having to do rework because you didn’t capture certain types of tax registrations or understand how business partners are set up in the system.”

She says the decision needs to be made upfront if the solution is designed to be global, regional or local.

“That makes a big difference for tax, finance and compliance and impacts the way the solution is designed, the choice of software providers and how it fits together. IT integration, automation and understanding the enterprise architecture capabilities is really important because more countries and governments now require eInvoicing. Tax and finance is an important input into eInvoicing solutions because there are requirements to file invoices in a particular way. Custom duties and taxes are another reason why it’s important to decide how the solution will be rolled out across the business from the outset.”

Kaur recommends CFOs also closely consider the data insights they want the software to generate. “For example, Thomson Reuters’ solution allows us to pull data from across regions, so we can look at how our taxes are paid globally.”

She says bringing stakeholders along the journey is vital. “Never assume outsourcing to a specialist provider means they will take care of everything. Also appreciate it can stretch your timelines if the tax or finance team isn’t closely involved in the project from the start. So, have an agnostic team inside the organisation that takes a lens across the span of the work that needs to be done and manages the relationships between the outsourcing partners.” As this shows, starting early, engaging stakeholders and using trusted advisers will help ensure the often-complicated tax transformation journey is as smooth as it can be.