WHY THE FUTURE OF TAX LIES IN THE CLOUD

Kid Misso, VP New Initiatives, Avalara

Cloud technologies are revolutionising the way people work across a huge number of sectors. But for tax and finance departments, the cloud is becoming increasingly essential for firms looking to keep up in an ever-changing compliance environment.

Ten years ago, if tax and finance departments wanted to invest in tech solutions to suit their business needs, they either had to operate generalised business tools held together with  manual processes or expect to have lengthy, expensive and risky on-premise implementations of mostly unproven tax technology. Yet within just a decade, cloud driven technologies have rapidly evolved in the sector, and now dedicated tech can help departments stay dynamic and responsive to the constantly evolving compliance environment.

Kid Misso

This shift has come at a crucial juncture. In recent years, there has been an increasing demand from taxation authorities to collect a much greater depth of information from their tax payers in an attempt to drive down the VAT Gap (the difference between the actual and the expected VAT receipts).

The practical approaches to this vary greatly from country to country but follow the general principle of a shift away from summarised, self-assessed periodic returns towards transactional, government assessed real-time compliance.

E-invoicing is now mandated by a growing number of governments globally: 83 countries currently have some kind of e-invoicing or e-reporting legislation which covers voluntary e-invoicing for efficiency and mandatory for compliance.

Real-time reporting (RTR), where there is an exchange of data and / or visibility of information by tax authorities in either real-time or close to real-time, is another way in which tax and finance departments are looking for dedicated tech solutions to stay dynamic and responsive to the constantly evolving compliance environment.

As the tax-tech landscape continues to rapidly evolve, we can expect to see the whole VAT and invoicing process to become digital in the coming years. This means businesses have a responsibility now to identify how they can ensure the transition from traditional modes of work to being digitally-led is as seamless as possible. This can be achieved through transitioning to the cloud.

However, it is important to note that automation is not risk free and applying it to an inefficient process will only serve to magnify the inefficiency. For example, digital invoicing presents challenges in ensuring that the correct master data is collected and stored, systems are properly integrated to ensure that all the right data can be used and that all the systems and processes are up to date with the changing legislation. So, how can this challenge be mitigated?

As companies begin their migration to modern cloud based ERP systems there is an excellent opportunity to combine them with dedicated VAT systems that are powered by constantly updated tax legislation content to avoid significant customisation of their ERP system and provide strong cost benefits. For growing companies looking to focus on their core business activities these systems can significantly increase their agility.

Businesses that have begun to integrate cloud-based systems have rapidly increased efficiency to meet the challenges presented by real time reporting requirements. This not only increases business adaptability by helping companies to comply internationally more easily, it also crucially frees up time for employees to focus on other, high value, elements of their roles over the admin burden.

Businesses must also work closely with tech partners to ensure data is secure as they migrate to the cloud, and that once systems have been digitised the right protections are in place to keep data safe. Although infrastructure partners will take the lead here, executives should note that training staff should go hand in hand with these major process upgrades.

With manual routes of working increasingly becoming a thing of the past, cloud-driven technologies have accelerated in the tax and finance sector, helping businesses stay compliant in real-time. As tax regulations are constantly changing, the cloud is how tax departments can keep up.

 

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