As tax functions strive for efficiency and to add more value to the business, engaging the right tax technology is essential. However, the key to success is understanding what’s on offer and creating a tailored approach for each unique business.
As tax functions transform to streamline their processes and deliver more value to their organisations, the right technology is fundamental to success. As part of KPMG’s tax transformation framework, which includes driving better processes and creating the right service delivery model, technology acts as the ‘enabler’ of these changes, with more capabilities to come as automation, cognitive computing and blockchain advance.
Tax technology solutions available today enable:
Here we will delve into the burning platforms for technology transformation in tax functions, the power of the cloud, and how data and analytics tools can help the tax function to meet growing demands. We also explore trends to watch in automation, robotics, cognitive and blockchain, and how they might impact tax functions.
There are many internal and external drivers for transformation, including the need to do more with less, greater expectations from the broader business about the insights that the tax function can offer, and calls for greater transparency from the regulators which are increasingly leveraging advanced technology cut costs and boost revenues.
This all means that processes that worked five years ago are no longer acceptable in the current environment, so technology must be considered as part of a tax function’s overall transformation.
The challenge will be how tax technology engaged meets the specific needs of the business. There won’t be a silver bullet – but rather an end-to-end solution that is tailored to their needs.
Making things easier for tax functions to change is the raft of new Software as a Service (SaaS/cloud) products for tax, which offer agility and continually improving capabilities with every automatic upgrade.
New security protocols have reassured many organisations of the security and reliability of these SaaS solutions, making them more attractive in the marketplace. Cloud solutions mean the provider of the product is responsible for the maintenance and the infrastructure, and they provide more attractive pricing through a licencing model.
The right combination of SaaS can help tax functions cut out manual or repetitive/low-value processes, make compliance easier, and help to provide deeper insights into the business for future data-driven decision-making.
Like the cloud, data analytics in tax is nothing new, but it has previously been embraced more in other areas of a business.
Increasingly data and analytics technologies are being deployed in finance and tax functions. There’s also an expectation from the regulators that it will be deployed in tax and finance for testing of data accuracy.
New data visualisation tools (also known as analytics dashboards) are emerging, enabling tax functions to quickly and easily interpret insights and present them in an easy-to-understand way. For example, historical, current and future tax positions, the status of payroll tax, employment tax, GST, or customs data.
Data visualisations support quick interpretation and help to develop the elevator pitch on what the data is saying for upstream reporting.
As tax functions seize the benefits of the cloud and data analytics, it will pay to watch developments in robotic automation. This is the leveraging of technology to automate basic processes that don’t need to be done by humans.
Fringe Benefits Tax (FBT) offers an example of how automation is being used. FBT requires a lot of data sources to get the right figures (e.g. public versus private use of a car, an employee meal versus entertainment, flight costs, etc.) and it is very manual to bring those together and analyse. For many businesses, it is a tax which doesn’t represent a large dollar value, but takes up a lot of resources, so automating those processes will bring value.
At the next level, cognitive computing (computing that involves self-learning systems that use data mining, pattern recognition, and natural language processing to mimic the way the human brain analyses data) is still largely in the pilot or proof of concept stage in tax. But it will progress quickly. It is designed to mimic human activities such as perceiving, inferring, gathering evidence, hypothesising, and reasoning – and it could learn a tax regulation or rule and how to apply it.
For example, when a tax treatment is assigned to a transaction, the algorithms can identify – using deep learning – whether the tax treatment is correct, or it can adjust it in real time. Data will be so clean and accurate that there could be no need for compliance.
When machine learning develops further, it will be able to forecast and analyse trends from patterns in tax data accurately and effectively. That is going to help business planning and triaging downfalls.
For all the buzz around blockchain (technology that registers every transaction using encryption and puts it on a public ledger), its likely application in relation to tax functions is still yet to be made clear. However, it will eventuate, perhaps to help prevent tax fraud and for accurate tax collection.
There is no one perfect tax technology solution for all tax functions, but the right mix of enabling technology can help ensure the whole tax process is running smoothly end to end, and that a business remains compliant.
In short – embracing tax processing and data and analytics tools, engaging data visualisation to ‘tell the tax story’, and looking ahead to the automation, cognitive and blockchain capabilities on the horizon, will place tax functions in a powerful position for the future.
Contact Carolyn Harvey to understand how to take the first step toward transforming your tax function.