As the situation has unfolded, I have seen many companies focus on their approach to tax technology through three distinct waves.
The first wave saw many companies scramble to keep their businesses running amid sudden workplace closures and other social distancing measures by executing the technology component of their business continuity plans. Often this first involved working through the practical details of enabling people to work from home. Focus then usually shifted to collaborative platforms and processes to ensure connectivity not only within tax functions but also across finance and the broader organization.
Once people could do their jobs remotely, a second wave of technology-related activity focused on tax-related data — how to access it from the company’s systems across location and jurisdictions, and how to move it where it needs to go. During this wave, the companies in the best position were often those that had already invested in their ability to move data across their companies and tax workforces, going paperless and setting up electronic documentation that could be accessed remotely from the third-party platforms or shared drives.
But interestingly, even companies with leading-edge, paperless data strategies had to scramble to manage paper notices and other remnants of the analogue world, for example, arriving daily in their mailrooms. This led to a push toward optical character recognition and scanning solutions, as well as process and technology reviews that could drive these companies even further into the digital world.
Data is a key to maintaining tax compliance, as an increasing number of indirect and direct tax authorities around the world expect increasingly electronic relationships with their taxpayers. As part of the second wave, many tax teams devoted attention to e-filing health checks to ensure they can stay connected with tax authorities in the current environment.
More recently, I’ve seen a third wave begin to rise that centers on financial and scenario modelling. Government responses to help protect their economies have included a vast array of tax breaks and incentives for businesses. The tax teams of many international companies are turning their attention to modelling the impacts of this new tax legislation on tax provisions, reserves and filing positions, as well as financial forecasts.
Given the pace and volume of new tax measures in so many jurisdictions at once, the ability to filter and analyze data to surface opportunities to release cash can offer a huge advantage for international companies.
For the most part, it looks like many companies have been satisfied with the outcomes of their tax technology use through these three waves. When KPMG professionals informally polled over 300 tax and business leaders during a webcast, 70 percent said that the tax technology they use is sufficient to support their business and tax department during this time.
That said, the recent events have certainly challenged many tax technology, systems and processes — especially when it comes to continuity planning, collaborating to chase liquidity, forecasting and managing financial and reputational risk. When the current situation resolves, many companies can be expected to revisit and strengthen their tax operating models overall and their tax technology in particular.