Technologic advancement culminated into a sensible and important change in the business world. New companies appear daily, challenging the established models and proving that it is possible to do more and to do be better. It is up to the more traditional companies to foresee and take note of the changes, striving for continuity and success.
In this context, when the impact of technology is addressed, it is noteworthy that it is also not enough to have the best IT departments or the access to the most sophisticated devices and solutions. It is necessary to think about change in a broader concept, in which the digital mindset, innovation, updating and continued learning are a component of the company’s culture.
This trend does not affect only business and sales. The backoffice areas feel more and more the pression to keep up with this dynamic. In the tax area, we call this Tax Transformation.
Tax Transformation is a call and an opportunity for the tax professionals to revisit their goals, their strategies and structures. In fact, what is currently expected from the tax function is different from what was expected in the past.
We know that the Brazilian tax authorities, especially at the federal level, is one of the most advanced in the world. At the state level we have electronic invoices and other accessory obligations that are almost, if not completely, accessible and required in digital form. Tax authorities utilize technology for processing and analyze a big volume of electronic data (big data) and automatically generate inspections and assessments.
The taxpayers, on the other hand, hurry up not only to comply with the legislation regarding the adequate calculation and collection of taxes, but to have systems which allow everything to be assessed and payed within the legal deadlines and in an integrated mode.
We know that this poses a great challenge to the companies and, therefore, the moment presents itself as ideal for tax directors to reshape the way in which they add value to their companies.
Each company has its own reality and challenges. It is imperative to know and classify them in order of priority. In our methodology, we propose a workshop in the design thinking format, with the objective of gathering the relevant professionals of the company’s tax department so that we may identify the area’s main issues. Starting from there, we can define a transformation journey focused on the pillars of this process, people, data and technology. The order of importance must take into account the stage and appetite of the company for change (maturity), monetary and non-monetary resources relevance and urgency of each identified problem, among others.
After mapping the current scenario and the main challenges, we often encounter a company which does not have the budget to initiate a big and broad transformation project, and chooses to prioritize areas that generate savings to finance the project. It is common that the project begins with the automation of process, projects for the reduction of fines or solutions that enable the assessment of tax credits.
There is nothing wrong with this particular strategy as long as the company does not lose sight of the goals it wants to achieve. In that sense, it is more than necessary to have a roadmap of the full journey of transformation, to avoid wasting efforts and to assure progress, even if slowly.
A good starting point is to build a Data Lake, given that very often the fiscal documents are not stored in an organized and easily accessible fashion, as in most cases there is no intelligent usage of the data.
It is crucial to have a data strategy in the digital world, so that companies may know themselves better than the fiscal authorities do. Taxpayers spend a lot of money with the required structure to provide the tax authorities with required information and reports, but it is hard for them to use the produced and digitally available data to generate strategic information, understand and correct the past, make predictive analysis and plan for the future, through Data & Analytics (D&A).
A lot is said about Machine Learning and Artificial Intelligence and there is, in fact, a lot of room for improvements and innovation in the tax field through these technologies. However, in a reality that still involves many manual activities, sheets and lack of attention with already generated data, our recommendation is to take one step at the time. The transformation journey must involve a set strategy for the data, which establishes as one of its first steps the creation of a Data Lake that is designed with an efficient architecture and the necessary data protection layers.
From this point onwards, a lot can be done in terms of existing solutions in the market. It could be worthwhile to leave the spectrum of the traditional suppliers with old solutions and embark into a journey to get to know the innovation ecosystem and even open innovation. The desired solutions are not always available and ready in the market, and to be leader in the field might require the need to invest in the co-creation of a build-to-suit solution.
Another topic that must be faced – which was briefly mentioned above – is regarding the culture of the company, the area and the profile of the professionals responsible for the execution of the transformation. The natural resistance that may arise must be a point of attention, many times caused by the lack of required knowledge and skills (like analytical ability, technology knowledge, digital mindset), besides insecurities and uncertainty about the future.
Many professionals believe that helping the company to transform might set the stage for their replacement by a robot. It is important, therefore, that the process be conducted with transparency and a clear communication. There should be no room for speculation. Instead, conditions must be given to the professionals to change themselves, so they can follow the new demands. Workshops, classes and trainings are inseparable parts of the transformation process.
We cannot forget that we often train the professionals for years to be efficient and execute their duties almost with no time to think. And, suddenly, we want everyone to become analytical and to generate insights. A company recently shared in an event that they created a monthly schedule with their team, so they could make a brainstorming focused in D&A. The request for the teams to bring ideas and insights while performing they regular work and in the middle of their busy agendas was not being effective, until they realized that people did not know how to do that, did not separated a moment to do so and that this particular activity was harder to be performed individually than in groups (a setting that stimulates collaboration and shared learning).
The human factor is also an increasingly valuable ingredient in innovative environments. The machine is not yet capable of substituting the human being in all its complexity and functionality. Balance, empathy, relationships, collaboration, energy, persuasion and motivation still are important human abilities in any work and business environment and must, more than ever, be valued. Diversity is also a crucial element. After all, how could one innovate in a homogeneous environment where everyone has the same background and reasoning?
How about your company? Did it already start its Tax Transformation journey?