By Roger Lindelauf, Director, SAP Centre of Excellence, Vertex Inc
Businesses across Europe continue to navigate a complex tax landscape as they attempt to automate their indirect tax determination and calculation requirements. However, many tax professionals use the limited functionality offered by their organisations’ ERP systems, or the in-house software developed by their IT departments to perform the task.
Unfortunately, these solutions are just not sophisticated enough to keep up with the frequent changes to the tax rules and regulations businesses are often subjected to across Europe.
Companies need to deliver accurate and timely finance reports to avoid being fined by tax authorities or being ear-marked for an audit. As a result, tax teams are under increasing pressure to make sure their calculations are right first time, every time. But with organisations typically reliant on the solutions available to them to automate the process, errors are all too frequent and leave businesses wide open to compliance failures.
To look in more depth at the raft of challenges experienced by tax, finance and IT professionals across Europe who use SAP to manage their indirect tax automation process, we recently surveyed their views. The research showed that one of the biggest challenges for 38% of our respondents, is managing tax requirements for multiple geographic jurisdictions, and for a 30%, it’s staying on top of legislative changes to tax and ensuring they’re applied effectively within the solution. And if the tax landscape wasn’t already complicated enough, 30% of respondents cited managing disruption caused by COVID-19 as an ongoing issue, closely followed by Brexit for 29%. Managing accounts payable (AP) determination was also highlighted as a painful task for 29%.
Another cause for concern flagged in the research is the lack of connection between the needs of the tax team and IT’s ability to understand and act upon these requirements using their tax automation solutions. Almost 30% of respondents admit that IT’s lack of knowledge in recognising how to keep up with the solution updates is a real issue. When asked about the limitations of their current indirect tax solutions, 41% agree that there are insufficient internal skills within the business to manage them effectively.
Joining forces for a future-proofed tax automation
The frustrations felt by tax and IT when it comes to tax automation are made abundantly clear in the research. Along with finance, tax and IT need to work together to find a better way to manage their indirect tax calculation and determination needs. They also need to agree on a future-proof solution capable of managing whatever changes are likely to be applied to tax rules and legislation further down the line.
When asked about their key requirements from a third-party indirect tax automation solution, tax and finance pointed to reliability, usability, and efficiency for integration as their key priorities. APIs are another future requirement to help build system implementation processes that are more streamlined and create scalability throughout all business and global operations.
Increasingly, we’re seeing more and more businesses across Europe turn to more sophisticated third-party tax automation solutions, accelerated by the adoption of SAP S/4HANA. There’s been a real shift towards organisations opting for a solution that integrates into SAP, improving accuracy for VAT applications on transactions, automatically.
Joining forces with key stakeholders is a crucial step to finding an approach that works successfully for all. However, with tax regulation complications showing no signs of diminishing any time soon, can businesses really afford to stay as they are and take a chance on tax compliance or is it time to invest in a new, more reliable, efficient, and future-proofed approach?
A study carried out by independent market research specialist Vanson Bourne. 420 finance, tax and IT decision makers were questioned across Europe.
