By Russell Gammon, Chief Innovation Officer at Tax Systems
Today’s tax teams are under pressure as new data transparency rules and legislation like the OECD’s Pillar Two pile on new obligations and compliance requirements, creating additional tax workloads for teams that are already under-resourced.
These shifts in global and domestic tax policy have increased scrutiny, accelerated reporting timelines, and placed greater demands on data accuracy and transparency. As a result, tax teams are being asked to manage real-time and digital reporting while enabling greater transparency and tax disclosures – including ESG and sustainability reporting as well as demonstrating responsible tax practices via country-by-country reporting. In addition, most tax teams are being asked to do all of this extra work with the same, or less, budget than previously.
With manual Excel-based workflows and fragmented labour-intensive processes creaking under the strain, tax teams are understandably looking to digital technologies to generate performance gains and reduce the risk of errors and fines.
While this may seem like the obvious answer, a substantial 70% of digital transformation initiatives fail to meet their objectives. This sobering statistic should serve to focus the minds of every tax professional that wants to ensure their tax transformation projects succeed. Getting implementation right is a mission-critical goal.
The key areas to focus on
Problems can arise from the outset if the roles, ownership and scope of tax transformation projects are unclear. Similarly, attempting to automate broken or inconsistent processes will simply serve to exacerbate existing flaws, amplifying inefficiencies and creating faster, more expensive errors.
Tax teams looking to assure implementation success should focus their time and effort on four core areas:
- People – Transformation projects are more likely to succeed when teams are fully on-board and engaged, roles are clearly defined, and project objectives, outcomes and timelines are clearly communicated and understood. Ideally, project leaders should engage with all stakeholders, including IT and finance colleagues, from the get-go to facilitate integrations with core systems and maintain compliance.
- Process – Before introducing automation, mapping existing workflows will be essential for identifying inefficiencies, eliminating inaccuracies, and understanding data quality and flow – where tax data originates, how it is accessed and transformed, and where data acquisition errors or bottlenecks occur. For example, when requesting data from other parts of the business.
- Data – Having information that is clean, complete and readily accessible will be essential for achieving accurate results. When data is fragmented across spreadsheets or departments, errors multiply and visibility declines. By consolidating and standardising datasets across areas such as provisioning, Pillar Two and country-by-country reporting, teams can minimise duplication and strengthen confidence in their overall tax position.
- Technology platform – Cloud-based systems provide a truly unified environment in which data, workflows and sign-offs can be managed securely to maintain compliance and reduce key-person risk. By simplifying control and visibility across the tax lifecycle and providing a centralised source of data, these adaptive platforms can be customised to the needs of the business, enable seamless collaboration, and deliver full transparency across provisioning, reporting and review processes.
Start small – and expand capabilities over time
When it comes to tax transformation, investing in robust project planning and management will pay long term dividends.
Those organisations that define a clear vision and ensure they keep people, process, data and technology at the forefront of their implementation strategy, are most likely to generate maximum value from their digital transformation investments.
Finally, while tax teams may feel under pressure to modernise fast, there are significant benefits to be gained from starting with small highly-targeted quick win projects that will demonstrate proof of concept. Providing a platform for further incremental projects, it’s an approach that both delivers value continuously, while enabling tax teams to test new technologies and expand their capabilities over time.
Tax transformation success is not defined by speed or scale, but by focus and execution. Organisations that take a disciplined, value-led approach will not only avoid the pitfalls that derail so many programmes, but build tax functions that are fit for today’s demands and resilient enough for what comes next.