Playbook for a Successful Tax Technology Solution: Key to success: Engage tax technology and IT resources early and ensure continued involvement.

Author:Ruggles, Andy
Position:Information technology

The business and tax environments are changing rapidly, significantly affecting how corporate tax functions leverage technology, engage with their information technology (IT) departments, and execute technology projects. To adapt to challenging times, tax needs to reevaluate how it exploits data and technology and reconsider the skill sets needed to transform the current tax function.

Global tax administrations and other stakeholders demand tax transparency, resulting in additional reporting requirements, increased controversy, and risk to reputations. In addition, tax is expected to step up to contribute to the organizations broader objectives. To meet increasing demands with tighter deadlines, tax is joining other enterprise functions to deploy technology and data analytics solutions that will enable quicker access to accurate data.

Heavy reliance on spreadsheet analysis is no longer viable. In fact, PricewaterhouseCoopers' (PwC's) predictions for the tax function of the future indicate that:

* more companies will use their enterprise-wide financial systems to prepare tax calculations (e.g., income tax accounting and indirect taxes), thereby replacing spreadsheets and traditional tax technology solutions; and

* the vast majority of tax functions will rely on professional data analysis tools to assist decision-making in areas such as risk detection, identifying opportunities, projections and scenario planning, and overall business support.

In light of the growing interest in leveraging technology for tax, tax functions must now be able to execute larger and more complex projects than ever before. In addition, these projects require the attention and acceptance of key internal and external stakeholders. After all, accounting, treasury, operations, and other functions are competing for the same funding. Furthermore, when technology projects are approved, it is critical to engage the right players, with the appropriate skill sets, early in the process. Tax needs to provide a clear vision, governance, and strategy for project execution to avoid common pitfalls that can jeopardize results and benefits.

Making Your Tax Technology Project Stand Out

Here are some ways to make your tax technology project shine.


For a tax technology solution to be approved and given high priority, tax needs to explain clearly to C-suite stakeholders why the technology is worth the investment. The cost/benefit analysis must be thoughtful and carefully constructed and consider various solutions. Although financial costs and benefits--such as efficiencies gained and costs saved by leveraging cross-functional or enterprise solutions--may be easier to quantify, nonfinancial costs and benefits--including the impact on people, compliance, and statutory requirements--are also critical to the overall assessment.

When creating the cost/benefit analysis, tax should include benefits that other functions or departments will realize, because a comprehensive assessment is more likely to receive broad support from the enterprise. For example, implementing capabilities around transfer pricing also benefits the operations related to product profitability and forecasting. Measurable areas of cost savings may include:

* eliminating hours to meet certain compliance requirements;

* reducing staff costs to perform preparatory tasks (e.g., shared service center or co-sourcing with a third-party vendor);

* increasing staff capacity to perform more analytics;

* improving the ability to cross-train, hire, and retain key staff, provide career progression, and reduce staff augmentation costs;

* eliminating software costs or other recurring expenses;

* identifying tax planning opportunities; and

* decreasing the risk of penalties.

In addition, nonfinancial benefits impacting the broader business may include:

* enhanced collaboration with external stakeholders;

* specific tax compliance needs (e.g., CbCR, SAF-T);

* alignment with overall enterprise or finance transformation efforts that leverage technology investments, new resource models such as shared services, and eliminating redundant costs;

* more certainty with respect to tax positions;

* lower "risk" ratings (depending on the country), which could lead to reduced audit or investigation risk...

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