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Tax master data management: 5 reasons it should be your priority in 2024

In the era of digitalisation, tax master data has been catapulted to the top of the list of priorities for global tax teams.

Whereas most people’s impression of data was once defined by vast, manual databases that were almost impossible to navigate or refine, in the modern world the role of data has been transformed and it is now considered an essential fuel for all critical business processes.

If your business is yet to embrace the power of data, here are five trends to consider that underline its unquestionable importance to companies of the future.

Why not share them with decision makers in your organisation and help to make master data your priority for 2024 and beyond?

Real-time reporting is expanding rapidly; more countries are mandating its use, while most global organisations are implementing compatible systems to achieve complete data visibility and live tracking.

What’s more, digital reporting and e-invoicing – both of which are due to become mandatory across the EU as part of the VAT in the Digital Age proposals – rely on complete, accurate master data.

Businesses that have poor-quality master data – filled with gaps, errors and data zombies – will struggle to comply not only with these regulations, but also with the accurate and timely determination of VAT, resulting in further breaches of regulations and potential penalties.

If your master data is poor, it doesn’t matter how expensive, modern or dynamic your systems are, the results you achieve will inevitably be sub-standard. As we often say, if you put garbage in, you’ll get garbage out.

As such, the pressure is on to ensure the data entering your systems is correct and complete at source.

Driven by the relatively recent widespread adoption of technology throughout all aspects of tax management, tax authorities are seizing the opportunity to demand more data and proof of compliance from businesses.

Tax authorities accept that raising rates is always an unpopular step, but faced with pressure to increase revenues they are increasingly focused on identifying cases of potential fraud – meaning both the original taxes due are paid and penalties administered.

Many major ERPs, tax solutions and e-invoicing setups now connect directly with tax authority systems, meaning a company’s data can be scrutinised and assessed by administrators without the need for a paper trail or a lengthy delay.

Indeed, a growing number of tax authorities now expect this data in real-time, meaning there really is no place to hide.

Data must be correct, accurate and complete at source or your business risks being exposed by the newfound determination of authorities to leverage digital data to ensure compliance.

Multiple research studies over many years have shown that visual representation helps people to process and understand information.

Tax professionals are no different and many would no longer consider working without a visualisation platform providing a 360 view of their data, transactions and compliance status at all times.

Smart user interfaces have become the norm; not just in finance, but across all modern analytics technologies. It allows tax teams to view critical data in a clean and visually pleasing display that is designed to deliver a quick oversight and the ability to take a deeper dive into data.

There is now no hiding place when it comes to master data. More forward-thinking businesses are utilising visualisation platforms and real-time reporting systems to gain access to an instant and comprehensive overview of their tax and e-invoicing compliance status.

With visualisation systems becoming commonplace in tax, businesses must ensure the accuracy of their data if they are to be able to rely on what they see before their eyes.

Some 20 or 30 years ago you may have been excited that your new recruit in the tax team came with an established array of skills in Excel.

But the role of the tax team has changed and the tax professionals of 2024 are multi-faceted, highly-skilled and intuitive experts. Spreadsheets are out. Automation and technological power are in.

And what’s the point of hiring tech-savvy tax professionals to leverage your shiny new systems if they will be powered by bad data and consequently produce poor results?

To attract and retain the brightest tax talent, you’ll need to have robust master data processing and cleansing systems in place to give your team the best possible chance of delivering optimum results.

Depending on the industry your business operates in, you may already have noticed the range of regulations and scope of tax liabilities has been growing in recent years.

In particular, companies selling digital goods and services have found their sales are increasingly subject to VAT and other indirect taxes. And it’s not only digital companies affected; regulatory updates have been introduced in multiple industries over the last 12 to 18 months.

If your business does not have relevant and reliable data for each of your customers and suppliers, it is impossible to determine your tax liability. And in periods of changing regulations, the risk is heightened.

That’s why we advise businesses to identify and manage the risks that lurk within customer data. Incomplete or error-strewn customer records can result in inaccurate tax determination, which is the precursor to non-compliance.

By cleansing and maintaining your customer and supplier data, your business will increase the likelihood of achieving compliance and improve its ability to integrate new tax liabilities in the future.