By Daniel Levin, Connected Tax Compliance Australia and Sabine Barlage, Connected Tax Compliance NL and EMEA
However, whilst transformation through technology is the goal of many organisations, reaching that goal can often turn out to be more difficult than anticipated. Cost over-runs, unfinished transformations and a low return from technology investment are not uncommon. Tax functions hoping to improve their compliance preparation process through enabling technology should be aware of some of the pitfalls of transformation projects, and act accordingly.
Transformation that doesn’t deliver is a reality. This is one of the clearest messages from the recent PwC global survey on the future of the tax function. While there was clear consensus among respondents that technology enablement was critical when it comes to meeting the increasing compliance and reporting burden – almost four out of five respondents (79%) said that technology was key to future success – not many reported successful technology implementations right across the tax function.
Often technology is key to the systemisation of tax data to generate automated tax calculations. However, the PwC survey shows that fewer than half of all companies think their data is in a system-ready state for the application and implementation of tax technology. And no more than a quarter of companies think they are very effective in using data to implement tax control frameworks, generate insights, or anticipate regulatory change.
“Tax technology tools are often built in a way that is quite rigid, static and inflexible, and if they are not implemented in an optimised manner, users end up having to retrofit their processes around how the tool works, rather than the tool fitting around how they work. And that is when people end up saying ‘it’s all too difficult, let’s go back to spreadsheets’.”
Daniel Levin, Connected Tax Compliance Australia
We frequently see how readily technology projects can lose momentum. What tax functions who are seeking transformation often lack is an implementation strategy, and support from key stakeholders.
When it comes to stakeholder support for a tax transformation - with budget to match - it is frequently the case that the return from technology has not been adequately articulated. One way of addressing that is to identify a quick win from the use of off-the-shelf data transformation and cleansing tools that are relatively easy to implement, and where savings are immediate. For example, think of Alteryx, an “Extract, Transform, Load” (“ETL”) tool that can reduce hundreds of hours of manual data gathering processes. Automated mapping of data to integrate compliance and reporting processes tools like Workiva, PwC’s Tax Data Assist, Tax Automate and Indirect Tax Edge saves even more hours of manual work while enhancing your controls and digital audit trails that will be needed for real-time tax reporting. There are instant tangible benefits for any wider technology investment business case.
Yet quick wins only turn into long-term advantage in the context of a technology strategy that encompasses data gathering and data quality, a future technology acquisition roadmap, and tax operating model optionality. Selecting the right implementation partner is critical to not only meet implementation deadlines but also that selected technology is utilised.
Helping tax leaders build a business case for change that is compelling for internal stakeholders should be a core part of working with an implementation partner. As part of Connected Tax Compliance at PwC we always begin by creating a tax compliance and technology strategy. This involves collaborating with organisations to determine a clear data strategy, technology roadmap, tax function setup, sourcing preferences - identifying current problems and scoping opportunities for improvement, as well as assessing the likely consequences of not doing anything.
“If you are going to implement technology well, it requires tax technical and data skills. And this is becoming more common – in fact almost any tax job today will demand experience in tax technology, data wrangling and transformation. It is when you have all those skills and can bring them to bear that you are more likely to get an optimised implementation of new technology.”
Sabine Barlage, Connected Tax Compliance NL and EMEA
There is certainly no better time than now for leveraging tax technology in the context of wider business transformation. As companies re-invest in cloud-based ERP transformation there is an opportunity for the tax function to be an integral part of a cross-functional business transformation process.
That is for companies to choose. And the choice of tax technologies is now better, and the choice of implementation routes is richer – whether in-house, co-sourced, outsourced, or a blended approach. But whatever the approach, investing in the underlying implementation strategy will prove decisive.
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