Jenny Clarke and Renuka Kimber discuss technology avenues for tax functions.
As technology continues to open new avenues for growth across the industry, ‘tax transformation’ is the hot topic on the agenda of most tax leaders.
But what does it involve and what’s the interrelationship between transformation and the investments tax functions have been making in the digitisation and automation of tax to date?
The first step toward a future-proofed tax function is digitisation. This requires working with IT and other key stakeholders to ensure the right systems and processes are in place so that tax can openly access the vast store of data required for operations, reporting, filing and strategic analysis.
Tax is one of the largest consumers of data in any business, drawing information from a range of areas and sources that generally weren’t designed with tax requirements in mind. This can have a significant impact on not only the quality of tax outputs, but also the opportunity for value-add to the broader business.
Indeed, there is an increasing expectation that tax (like risk, HR and other core areas) begin to shift from being a passive consumer of data to active contributor of insight through the digitisation of the function. It is the joint responsibility of both the Chief Information Officer and the Head of Tax or Chief Finance Officer.
Beyond the increased quality of outputs and efficiency in terms of access to the right information, the digitisation of tax can extend the role of tax beyond compliance through integration with data from other functions to yield insights previously unattainable.
More simply, automation refers to the use of technology applications to mechanise a currently manual and Excel-based process or set of processes. Doing so usually reduces costs and errors and enhances substantiation of outputs. Given the rapidly decreasing cost of relevant applications, automation is becoming increasingly accessible to organisations of all sizes. A standalone investment in automating a specific tax process can sometimes provide a proof of concept to support the business case for investment in wholesale tax transformation.
Lastly, transformation refers to the redesign of a tax function with respect to the people, process and technologies (including digitisation of tax and automation) required to deliver on the tax functional and broader business strategy most efficiently.
In Australia, tax transformation is largely being driven by the macro trends of economic uncertainty, globalisation and increasing regulatory scrutiny particularly with respect to governance and transparency. Ultimately, taking a holistic approach to the design of tax yields a leaner and more effective function elevated to the role of strategic advisor to the broader business.
However, the increasing complexity of the tax landscape means that any change can be difficult to implement, particularly in the case of multiple and varied data sources. Thus, it’s important that tax functions adopt a methodical, data-driven approach to understanding tax systems, processes and specific compliance requirements in determining the right approach to digitisation, automation and ultimately transformation, to ensure the best outcomes possible.