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Change is happening at a rapid pace throughout the indirect tax industry; you’ll probably already be aware that new regulations, requirements and mandates are being announced on an almost daily basis by tax authorities around the world.
With this in mind, every tax professional must ask themselves whether their company’s existing processes and systems have the functionality, capacity and flexibility to ensure they remain fully compliant throughout this period of unprecedented change.
If the answer is no (maybe you already know you’re struggling?), don’t panic, there’s still time to respond and put your business on the right path by undertaking a tax transformation project.
What is tax transformation?
Tax transformation is a comprehensive and structured move away from the traditional way of managing tax in which meeting legal requirements is the first (and often only) objective for finance teams.
Instead, best-in-class tax functions in modern business focus not only on legality and compliance, but equally on optimising tax processes and implementing the finest technological solutions in accordance with overall business goals.
It’s no longer limited to what your tax team does. Tax transformation – and the immense benefits of it – extend across finance, IT, operations and even outsourced colleagues.
Take a look at your tax function and how you deliver tax. Ask yourself are you enjoying the complete portfolio of benefits that come from managing tax with a 360-degree vision. If not, what do you need to do to achieve this and to ensure your business meets the challenges of the future.
What triggers tax transformation?
No two businesses are the same and there are many reasons for investing in tax transformation.
In a Vertex webinar on the topic, 31% of attendees said new and changing tax regulations are the primary factor encouraging them to overhaul their tax systems, while a further 31% pointed towards restructuring processes within their finance operations.
The truth is that a vast range of reasons, both internal and external, could be behind the need for tax transformation. These include events within your supply chain, major legal updates and developments in IT.
How can you get a seat at the table for a tax transformation project?
1) The first step is to stop thinking like a tax professional. You’ll receive a more positive response from colleagues and decision makers if you take a position that puts frontline business goals first. These can include anything from improving customer interaction to driving increased profitability.
2) Be patient. Accept that most people across the business won’t be as passionate about tax as you are and that it may take some time to secure their support.
3) Bring hard data to the table. Major tax transformation projects are won and lost on facts and figures. Put some numbers to your current inefficiencies, lost revenues, staff limitations and, most importantly, the operational and financial gains you’ll see post-project.
4) Don’t be afraid to kiss plenty of frogs. By this, I mean you need to speak to anyone and everyone – often many times. This is the only way to identify all the opportunities that exist and the people who will be able to help every step of the way.
5) Know what you want. After all, you’re the expert when it comes to tax and you’re best placed to know which fixes are required. It pays to do your market research so that when senior management ask for a plan, you’re ready to spring into action with a considered proposal.
Identifying the must-haves
Once a tax transformation project is going ahead and your seat at the table is assured, the next challenge for many tax professionals is to identify the must-haves from the upcoming investment.
One of the most common issues we hear of when talking to new clients is businesses fixing reporting errors and responding to problems as they arise rather than looking at remedies for the root causes. With reporting, this approach is unsustainable and will inevitably result in data errors populating final submissions. A manual approach will not plug the gaps every time.
That’s why I’d always deem two things to be a must-have in every tax transformation project:
1) Cleansing, optimising and integrating master data. It’s your master data that will determine your success as a tax team. If you focus on automation without prioritising master data, you’ll get rubbish data through your system faster – but it’ll still be rubbish!
2) Correct tax determination at the time of transaction. This will transform every aspect of your performance from the accuracy of your data to operational efficiency and budget savings. Do not let it slip!
Of course, there are many more hopes, ambitions and goals you may wish to include in your roadmap. Every business is different so think of it as like peeling an onion; work through the layers to identify what really matters to you and put those at the top of your agenda.
But don’t try to do everything at once. You might not be able to get where you want to be in one step, it could be that tax transformation will encompass multiple phases over several years for your business.
That’s why I’d also advise considering how to minimise the ‘regret cost’. Ask yourself if you really need to fix something now or if you’ll be better off in the long run by waiting to prioritise it at a later date.
If your business is considering a tax transformation project we’d love to hear from you. We’ve got over 10 years’ experience of working with more than 100 global clients and we’d love to share our advice.
