Russell Gammon, Chief Innovation Officer at Tax Systems
Pillar Two marks a turning point in the way multinational groups coordinate global and local tax compliance. In order to produce the jurisdiction-level detail required for Pillar Two, organisations must integrate processes that have long been managed separately – such as tax provisioning and transfer pricing.
As a result, global tax teams now need to establish a consistent framework for data, definitions, and governance. Meanwhile, local entities must adapt systems and processes to meet both domestic reporting rules and consolidated global requirements.
Undertaking all this in the most efficient way possible is mission-critical for organisations that want to cost effectively operationalise Pillar Two reporting and comply with confidence. To achieve this, forward-looking companies are leveraging tech-enabled tax control frameworks that enable them to aggregate data from multiple sources and optimise how they undertake and reconcile local and global reporting.
Bridging the divide: global and local reporting
Bridging the gap between global policy and local implementation presents significant challenges when it comes to managing local legislative variations, data collection and reporting.
Gaining a centralised and comprehensive view of Pillar Two data will be key here. Pillar Two calculations and reporting require the collection of huge volumes of data from numerous sources. By automating this process and collecting and consolidating financial data from all entities onto a single platform, organisations can transform the burdensome obligations associated with Pillar Two compliance into an actionable opportunity to enable greater tax efficiency and enhanced cross-functional collaboration.
Enabling organisations to upload information once and re-use it as a single source of truth for their Pillar Two tax compliance data, today’s modular cloud-based calculation and compliance platforms make it easy to gather and seamlessly integrate data from centralised systems and geographically dispersed teams. All of which minimises the risk of errors, maximises operational efficiency, and provides all stakeholders with the same reliable information.
Establishing a unified framework: the benefits
Integrating tax provisioning, CbCR and local tax data into a unified framework is crucial for achieving consistency, efficiency and transparency. Something that is vital in an era where global tax scrutiny is increasing.
By leveraging an integrated platform, organisations can integrate their Pillar Two, CbCR and provisioning processes and automate the production of the GloBE Information Return (GIR) alongside the preparation of compliant local returns. But that’s not all.
With the right technology in place, organisations will be able to navigate the compliance complexities associated with overlapping international and local reporting by ensuring that data is ready for various reporting schemas and deadlines. Those that utilise a centralised solution that incorporates a dynamically updated rules library will be well positioned to manage local variances and ensure consistent reporting.
Armed with these capabilities, organisations will be able to get closer to materiality faster for reporting purposes while ensuring they pay the right amount of tax at compliance time.
Improving accuracy, control and strategic visibility across jurisdictions
Aligning local and global Pillar Two data management and reporting on a cloud-based unified platform will also deliver the enhanced visibility and control global enterprises need to support better risk management and more informed decision-making.
This visibility makes it easier for tax professionals to proactively identify and remediate inaccuracies or consistencies before information is made available to authorities. It also provides a comprehensive view of the group’s overall tax position, providing access to high quality data that can be used to evaluate tax planning strategies and ensure tax outcomes align with operational results.
Pillar Two: a transformative opportunity
By bringing together previously separate tax processes, such as provisioning and CbCR, multi-national companies can initiate a more efficient Pillar Two compliance and reporting cycle that assures consistency and accuracy across all territories.
Adopting a unified platform can transform an organisation’s approach to Pillar Two into a tech-enabled strategy where data extraction, calculation and reporting processes are automatically integrated to maximise efficiency.
Alongside delivering an optimised single source of data truth for global compliance together with support for all core calculations, these platforms streamline reporting and provide audit-ready documents that are essential for demonstrating compliance to tax authorities. Continuously updated to reflect the latest changes in global and local Pillar Two legislation, they also offer long-term compliance assurance.
Armed with the ability to manage their entire tax control framework from a single, fully connected platform, multi-national organisations can significantly reduce operational complexity while ensuring accuracy at every step of the Pillar Two compliance process.