By Tom Birch, Indirect Tax Reporting and Strategy Lead, PwC UK
The speed at which data is changing the way tax operates makes the strategy around it central to modernising processes and redefining the role of tax within any business.
Data and analytics is the top technology investment priority for UK business leaders, according to PwC's 26th Annual CEO Survey. In relation to tax specifically, the 300 business decision makers we interviewed for our Reframing tax study see data management and governance as the primary driver of tax tech investment.
Reliant on the business
Just as good data can make any tax team's job easier and more efficient, incomplete or substandard information can hold up transformation and undermine tax solutions. The big issue is tax teams often have little direct control over the data coming in from finance, sales, logistics and other parts of the business.
In theory, this shouldn’t be a problem. Tax can have an important and influential role up-front across the whole data strategy - setting and monitoring supply agreements and quality criteria for the data supplied by the business. In practice, there are frequent gaps, errors and inconsistencies in the inputs, but little incentive for business teams to sort out the issues at source. As a result, tax teams spend far too much of their time cleansing, compensating and manipulating the base data.
Transformation as the catalyst
Sorting out these data sourcing issues once and for all would make tax teams much more productive – enabling a human-led, tech powered approach that frees up time to support the business and deal with incoming tax changes, while enhancing the quality of data-enabled business insight and support. The good news is that we now have a window of opportunity to do just that, with both carrots and sticks to make it happen.
Digitisation and automation are providing an important catalyst for overhauling data management, not just within tax but across the business.
In turn, the real-time reporting of transactional data as part of the move to making tax digital across the world is forcing business teams to strengthen the quality and control of tax-sensitive data and processes. With tax authorities checking for errors and omissions, businesses increasingly won’t be able to issue invoices until they comply. With the resulting ability to collect revenue at risk of being delayed, the business has a clear incentive to fix any tax data issues quickly rather than leaving it to tax teams to deal with them.
The business case for ‘right first time’ data management is equally strong. For example, the relocation of a production facility may look good in terms of skills and supply times, but could be uneconomic because of the tax costs. Timely and reliable data would allow tax teams to alert boards to these and other strategic risks.
The way forward
How can you make the most of the opportunity to put tax data management on a firm footing? For us, five priorities stand out:
- Involve tax teams in transformation as early as possible
- Put resources into data management and agree on responsibilities
- Embed tax into the data governance model of the business
- Set a limit on data checking and cleansing, and enforce it
- Realise the benefits
Involve tax teams in transformation as early as possible
Reach out to business teams and make sure tax teams are inputting into key decisions on enterprise-wide automation and digitisation from the outset. This includes ensuring the specifications for a new finance, sales or logistics system take full account of the tax data that needs to come off it. If you wait for tax teams to be consulted, you could find that it’s too late.
Put resources into data management and agree on responsibilities
Data management needs a firm hand on the tiller. Forward-looking businesses are now beginning to dedicate more time to data management. The remit includes assessing the scope and materiality of source data needed, working with business teams to set and monitor clear input expectations and working with them to sort out any problems. Even if your tax team or your data problem isn’t large enough to support a dedicated manager, you can still assign a senior professional or provider to take charge of data as part of their responsibilities.
Embed tax into the data governance model of the business
Tax data should be subject to the same oversight and control as customer or finance information. The focus should be getting data right first time rather than just checking after the fact. Priorities include assigning tax process owners and setting up standardised practices and controls across all tax-sensitive business processes.
Set a limit on data checking and cleansing, and enforce it
With data supply largely automated and business teams applying the rules, tax teams should only be checking and cleansing the small percentage of data that is sensitive or high risk. This might include data relating to new products, new ledgers, new supply routes or newly registered territories. If tax teams are routinely having to sort out problems in the data, then you should stop and tackle this at source as part of a firm-wide data governance procedure.
Realise the benefits
When putting the effort in to make data work harder, tax teams should ensure they get all the benefits out of sweating the asset. The obvious benefits include the productivity improvements it will give the tax and finance functions and the business benefits that result. The sometimes forgotten benefits are that, with due consideration, reliable and timely tax relevant data can be used to identify issues across the business early, analyse prospective changes and plans with confidence and to forecast finances more accurately, amongst many other use cases.
More from us
This article is one of a series designed to help those responsible for tax navigate their transformation journey. If you have any questions or would like to know more about redefining the role of tax in your business, please get in touch.
Reframing tax: Where are you on your journey?
Understanding your starting point is critical to finding the right way forward. Use our interactive tool to assess where you are on your journey to being human-led, tech-powered and access further content to help deliver greater business benefits.
