Optimising tax technology strategy
June 2023 | TALKINGPOINT | CORPORATE TAX
Financier Worldwide Magazine
June 2023 Issue
FW discusses the optimisation of tax technology strategies with Jennifer Deutsch and Genevieve Watson at Deloitte Tax LLP.
FW: Could you provide an overview of the ways in which technology is shaping, and enhancing, the tax function? With many tax functions operating under tight budgets, how important is it for companies to understand the tangible benefits of investing in technology?
Deutsch: Many companies of all different profiles and sizes are reviewing their finance systems, moving from their old on-premise enterprise resource planning (ERP) to the cloud. These enterprise finance transformation and infrastructure modernisation campaigns have a serious impact on tax departments. Tax is one of the largest consumers of financial data in an enterprise and there is a tax outcome to nearly every accounting transaction. Positioning tax with financial systems and business processes can yield numerous benefits, while managing audit exposure and overall risk through the alignment of finance and tax data. The key here is communication, for tax to clearly establish its position as a strategic business partner in the organisation. Defining a tax technology strategy is critical for articulating to key stakeholders what tax requirements are, and what benefits the organisation can derive by supporting those requirements.
FW: What benefits can companies gain from developing a clear tax technology strategy? What specific aspects should this strategy outline?
Watson: To identify and ultimately realise potential benefits, the tax function should develop a tax technology strategy that includes a roadmap centralised around a data model that supports regulatory compliance, operational and business decision making needs. The roadmap serves as a guide to plan for and manage operations, resources and budgets for tax departments, while preparing for ever-changing compliance requirements. Building a roadmap is one of the leading practices in order to drive digital strategy and advance the tax department.
“The roadmap serves as a guide to plan for and manage operations, resources and budgets for tax departments, while preparing for ever-changing compliance requirements.”
FW: How should companies go about evaluating their existing tax systems and processes to identify opportunities to bring in new technology? What gaps, weaknesses and inefficiencies should they look for?
Deutsch: Organisations should take the time to look at where tax data and process needs intersect across the end-to-end business processes – for example, order to cash or procure to pay – and identify the key components of those processes that are relevant to tax. The process evaluation should consider where the gaps are and what unknowns need to be accounted for. The organisation should then document those intricacies to create a vignette of the data that feeds that process, the technologies that are used in that process, the outputs from that process, and have that set up in a clear and meaningful way. And as the organisation develops a strategy to close any gaps, it should make them a core input when developing a tax technology strategy.
FW: What challenges are companies likely to encounter when integrating tax technology into their existing operations? To what extent can having a formalised strategy help to address and overcome these obstacles?
Watson: Tax is a consumer of data from all parts of the organisation, not just finance. Pretty much every transaction in the organisation has an impact on tax, and identifying the process and data that tax needs within the enterprise network can be an overwhelming challenge. Often, tax is an afterthought in getting a seat at the table in a finance transformation. Involving tax early can lead to the identification of opportunities and benefits to enhance the tax department, while also managing the challenges presented by disparate data systems.
FW: To maximise the advantages of tax technology, what steps can companies take to upskill their teams, deepening their knowledge and understanding of new solutions?
Deutsch: From a talent perspective, skills in the tax department are evolving. It may be a shift from hiring professionals with traditional accounting and tax backgrounds to including those coming from science, technology, engineering and mathematics (STEM) or optimally dual major type individuals. As organisations look to expand their digital footprints, the need to identify and develop skilled professionals is going to be critical. As an example, incorporating tax technology or modernising tax systems and processes, particularly around data management, will not only aid in tax planning and compliance, but allow for better data and automated solutions that can offer an opportunity for tax professionals to shift their focus away from repetitive, lower-value tasks to higher-value and rewarding assignments.
“Many organisations will continue to look for efficiencies and transparency gains while regulatory bodies are increasingly transitioning to digital and real-time reporting.”
FW: What essential advice would you offer to companies on ensuring their tax technology strategy covers the essential issues and is implemented as smoothly as possible?
Watson: While an enterprise transformation may be driving many modernisation efforts, we recommend that companies look at the big picture and consider all their tax types, such as direct tax, indirect tax and transfer pricing, alongside compliance processes, including tax policy setting, data management, compliance processes and tax audits. They should ensure their requirements and processes to address are clear on all of those areas, along with the workstreams and technology that can fulfil requirements. Companies should integrate the tax strategy into the finance technology roadmap and make sure that finance and IT are aware of tax requirements from the financial system, as that will be key to meeting tax data and reporting needs and also streamline the technology implementation process. As a final thought, whatever technology solution companies pick, they need to ensure it is nimble and can be easily updated to ensure the organisation is prepared for tomorrow’s challenges.
FW: Looking ahead, how do you expect tax technology to evolve over the coming months and years? What innovations and augmentations can we expect to see?
Deutsch: Our world is rapidly going digital, and an ever evolving tax technology landscape is a key part of that. Many organisations will continue to look for efficiencies and transparency gains while regulatory bodies are increasingly transitioning to digital and real-time reporting. Organisations that lack tax-sensitised data accessibility through integrated systems may be vulnerable to the changing expectations and digital reporting requirements of tax authorities. Whether the tax department is exploring a technical upgrade or a new cloud ERP transformation, partnering with the broader organisation on the tax technology strategy enhances not only the tax department, but increases strategic enterprise value and supports the overall business to remain adaptable in the face of the changing environment. In addition, technology like machine learning, ChatGPT and other artificial intelligence models are increasingly being considered by both taxpayers and tax authorities alike – evolving to leverage those types of technologies is not as far off in the future as one may assume.
Jennifer Deutsch leads Deloitte’s tax technology consulting practice and has more than 25 years of experience working with tax executives and their teams to address their need for sustained performance within their functions and contribute to their company’s marketplace objectives. She advises clients on operating model design, data management strategies and process, along with technology integration with respect to the tax function and its integration into the broader finance organisation. She can be contacted on +1 (213) 364 4829 or by email: jdeutsch@deloitte.com.
Genevieve Watson specialises in helping businesses to operationalise their management of their tax function, covering tax strategy, operating model, risk & governance, process design, automation, tax technology and sourcing. She also has experience across the Deloitte tax technology consulting propositions, with her primary focus on large scale transformation programmes and ERP systems implementations. She can be contacted on +44 (0)20 7007 9848 or by email: gnwatson@deloitte.co.uk.
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