Data analytics for tax: a primer.

• Author: McIntyre, Irish
• Position: PERSPECTIVE

Big data is one of the most important advances the business and consumer sectors have seen since the dawn of the internet. But what does big data mean for tax? What doors can it open?

Although some skepticism is healthy every time marketers and media outlets trumpet a new, seemingly mystical fix for real business challenges--and "big data" is a notoriously overused term--tax professionals should realize the potential. If we consider how strong the ties between technology and commerce have become, big data can do for the tax industry what it has done for the consumer sector.

First, a definition: data analytics, or "big data," broadly describes the growing size and complexity of the modern data landscape. It is also often used to describe the emerging technologies that can efficiently connect this data and drive new capabilities in data analytics.

The corporate tax environment is a perfect place to leverage the potential of data analytics, because it is a massive consumer of a company's data, right down to the transactional level. No matter how the data is displayed, all of it must tell one consistent story.

Data analytics allows the tax professional to transition from performing time-consuming, manual processes to simply having access to useful information and conclusions on demand.

Saving Money, Time

Broadly speaking, this approach saves time and money. It also delivers strategic value: data analytics opens doors for tax departments to simplify complex information, use that information in different ways at different times, and be better prepared for strategic planning--all facets of high-performing tax departments.

One legitimate consideration is the potential downside of this approach.

Businesses today create more data than ever, and they have the technical capability to store, access, and process that data into conclusions that are more dynamic, specific, and meaningful than ever. Tax authorities, in turn, are hungry for the data that businesses collect.

At this point, data analytics can become a sensitive issue for many corporations.

Companies are, with good reason, generally reluctant to turn over to regulators data stripped of its underlying context. Shareholders and other crucial stakeholders may view the act of relinquishing company-specific data as risky and shortsighted. Once tax authorities have data, they may choose to make it public, or their security measures may be compromised.

What's more, being able to obtain such data may...