Leveraging Tax Compliance for Business Growth

  • Christiaan Van Der Valk, Vice President, Strategy at Sovos.

As governments worldwide advance regulations to digitise tax processes and move reporting towards real-time, business leaders now have the chance to adopt an integrated, data-driven approach to tax and compliance. This shift goes beyond mere business requirements, presenting a strategic opportunity to enhance business value, streamline operations, and lay the groundwork for future innovations.

Historically, tax and compliance technology has tended to lag behind other business process areas. Marketing, operations, and finance categories such as customer relationship management (CRM) and enterprise resource planning (ERP) have already been transformed by technology, becoming holistic system-of-record platforms which, among their benefits, provide valuable insights from end-to-end data visibility. Making the right investments to modernise tax and compliance solutions likewise offer a significant opportunity to gain strategic understandings, cut costs and drive growth. Research by KPMG reports that 100% of tax professionals believe that leveraging data from across the organisations will not only make compliance easier, but also fuel smarter business decisions.

At many organisations, tax and compliance have remained tied to disconnected technologies and manual processes, with legacy systems and spreadsheets still common, and reporting conducted ‘after the fact’. But with increasing regulatory pressures around the world, these organisations face increasing risk and growing costs. Bloomberg’s Corporate Tax Survey found that 82% of organisations feel they are more exposed to tax-related compliance risk than they were five years ago. Organisations also expect costs to keep climbing, due to a combination of evolving regulatory, business and customer demands, with 90% of compliance leaders expecting costs to go up, according to Accenture.

Christiaan Van Der Valk

A Unified Approach to Regulatory Requirements

So, what is the solution? To deal with this effectively, organisations must take their data and move away from manual processes and legacy point solutions and towards a cloud-based platform with a ‘single source of truth’ that provides visibility and insights across the whole business. And today more than ever, that solution is mission critical due to the regulatory landscape.

Organisations are grappling with regulatory changes that are often sudden, relentless, and consequential, and can vary widely across the globe. Factors such as e-invoicing mandates – now in place in more than 80 countries, movement toward VAT mandates spurred by the European Union’s VAT in the Digital Age (ViDA), and the growing use of continuous transaction controls (CTCs) that allow tax authorities to view business activity data in real time are all demonstrative of an evolving, complex regulatory environment – one that  demands  tax technology and regulatory compliance become an ‘always-on’ function, not something which is handled after the fact. With more than 14,000 regulatory changes happening each month across 19,000 taxing jurisdictions, there is an onus on business leaders for improved improve data quality.

24/7 Compliance in an Always-On Economy

The future of tax and compliance will be cloud-based global platforms that are ‘always-on’ and provide a single view of trusted data. This unified technology not only modernises compliance to reduce long-term costs and risks, but also sets the stage for growth: companies need to be able to spot transaction anomalies, errors, overpayments and outliers in their data in real time.  

Our own Sovos Compliance Cloud is built to integrate easily into existing business systems including ERP, Procure to Pay (P2P) and eCommerce, offering real-time visibility as well as a holistic data system of record. Unified solutions which work with existing infrastructure, and enable business leaders to deal with compliance, tax and regulatory reporting in real-time meets the market’s need for modernised compliance.

There are five steps to modern compliance, and each one plays a critical role in business operation to ensure that businesses remain compliant across every transaction, regardless of the market.

  • Connect: Having a compliance solution that can connect seamlessly with a rich ecosystem of partners, financial technologies, and government agencies is critical to creating economies of scale in compliance processes. Compliance should sit on top of or within existing IT infrastructure, not force businesses to redeploy decades of work.
  • Identify: In an online world, legal certainty of who is engaging in a transaction is a foundational requirement to enabling compliance in a digital world. It is important to have a framework in place around the use of digital identity to ensure privacy and security. This includes the international context to help facilitate the cross-border transfer of a wide range of data.
  • Determine: When it comes to compliance, accuracy matters. Ensuring that every transaction conducted is completed accurately, in the moment in which it is being conducted needs to be a centrepiece of any compliance strategy.
  • Report: Summary reports are moving to more granular data to full-on ERP ledger extractions. All this data must be reconciled with the transactions stored in the government systems, and the data must be consistent across the life cycle of that invoice data being reported. From invoice filing to monthly filings which are now being pre-filled by governments, to audit files, to corporate tax filings, reports must now ensure that the data is the same.
  • Analyse: In an always-on world, businesses need the same view into their data as the government, so that audits don’t impact operations. Systems must be able to analyse and derive data from every transaction and all taxes to create a single source of truth which mitigates risk and highlights important patterns.

Driving Growth Through Compliance

As compliance increasingly happens ‘inside the transaction’, meeting regulatory requirements offers companies a huge opportunity: to transform their compliance strategy from just a mandatory function to a force for growth. In an always-on world, business leaders need the same view into their data as the government has so that audits don’t impact operations. This level of insight is the basic foundation but obtaining it doesn’t have to be a burden and the payoff can be immense. The critical outcome of this modernisation of compliance for business is instead a strategic asset: optimised business processes and rich, transactional, real-time data that can unlock tremendous enterprise value.

In a landscape where tax compliance risk is a significant concern for many organisations, adopting a cloud-based global solution for tax and compliance management not only alleviates worry but also establishes a strong foundation for growth.

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