Recently, I was pleased to finally get back out and about on the speaking circuit, discussing tax technology at the ITR Indirect Tax forum in Brussels!
As expected, there was lots of talk about the demands imposed on businesses by the tax authorities to automate the collection of tax data with live reporting, SAF-T (Standard Audit File for Tax) is a file type based on the XML standard. It is created in a standard readable format from data exports taken from accounting records. SAF-T is used internationally to ensure the fast and secure digital transfer of tax information. It is known for its high level of security, ability to simplify the collection of tax data and simple readability due to its standardised format., Electronic invoicing - widely referred to as e-invoicing - is the exchange of a digital document between a supplier and a buyer. E-invoices are issued, transmitted and received in a structured data format that enabled automatic and electronic processing. They contain data in a machine-readable format so that an AP system can read an invoice without manual data entry, leading to faster and more efficient invoicing. and more, i.e. discussions on the usual topics, yet always kept fresh by the never-ending stream of new challenges.
What I found particularly interesting is that there emerged a general perception that most tax managers don’t think the tax authorities know what to do with most of the data they receive and, as a result, it goes unused or ends up in a ‘Data Graveyard‘ (I can’t take credit for that metaphorical term, it was used in one of the conference sessions), which is tantamount to giant repositories of unused data.
Dead, unused data. If you believe that the data is truly dead, kaput, out for the count, then a word of caution… The thing with data is that it can be analysed, used in many different ways, and just because the tax authorities are not using it now does not mean they cannot use it in the future.
So the ‘bad data’ you are filing at present, unconcerned about because no one has said anything, could come back to haunt you in five years’ time. Perhaps a better term would be ‘Data Zombies‘ – data that you think is dead and buried, yet could spring back into life from beyond the grave.
And we all know what happens when a Zombie emerges, right? (hint: usually mass hysteria and a scramble to get the supplies and weapons in).
But prevention is better than cure, and the only sure fire way to avoid the bite of Data Zombies is to get a good old fashioned Zombie Apocalypse Strategy together:
Make sure that the data you file now for your tax returns and other tax compliance requirements is as accurate as it can be, with a digital link from the final report back to the source.
It’s absolutely staggering the number of companies we talk to that still do their VAT reporting from their GL data – creating manual journal adjustments for tax changes and using ‘cheat sheets’ for users to manually decide what tax rate to choose on complex transactions.
Too many focus on determining the correct ‘positive’ tax rate, simply discarding any zero value transaction to a single exempt tax code. Being able to reconcile all of your taxable and non-taxable transactions – especially the zero tax ones – all but guarantees you safe passage through the inbound hoard of Data Zombies.
If you have excellent visibility and transparency of your data, which can only be achieved by generating the tax data in the first place, you can be sure to have the greatest chance of full compliance (and survival).