Knowledge Is Power: How Transparent Tax Systems Fuel a Thriving Organisation

Tax functions in Europe and many other global markets are expected to provide transactional data to tax authorities at growing levels of complexity and transparency. Meeting these demands is a challenge but one that successful organisations should rise to enthusiastically.

Tax authorities demand data transparency from companies, but this accurate, real-time, and easy-to-navigate data is a potent resource for the businesses themselves too. Far from being a burdensome, time-consuming requirement, the data can open up a suite of opportunities to boost growth. Leveraging this data-first approach within your organisation can add strategic value far beyond traditional compliance and financial reporting.

If well executed, it can also eliminate many of the issues that typically dominate the process of reviewing organisational spend, making it quicker and simpler for any errors relating to tracking spend to be resolved as they occur.

Three Steps to Make Your Organisation’s Tax Systems Transparent

Improving the quality and accessibility of the organisation’s data is a necessity as far as compliance goes, and failing to do so can leave tax leaders on the hook for falling foul of increasingly demanding regulation. Beyond compliance, tax executives shouldn’t shy away from their potential as strategic partners encouraging their broader organisation to embrace data transparency.
Any organisation that wants to successfully harness this capability will need to ensure certain steps are taken:

Ensure data is correct at origin
To be useful, data must be accurate. The tax department has to be proactive to ensure the organisation’s data is correct at origin. In reality, this means understanding what people in other departments do at the coalface. Forming relationships and holding cross-functional workshops are valuable and help define the tax function as a transformation leader.
Consult on the right software platforms
Collaboration with IT is likely required because ensuring data quality is not limited to processes but involves systems too. The digitisation that enables relevant transaction data to be captured and safely accessed by all parts of the organisation needs to be smartly implemented. The right tools can prove to be powerful levers enabling the organisation to take full advantage of their own data transparency, while technology-enabled solutions can do a great deal to automate, simplify, and speed up data collection. For more information on which tax tools to pick, read Never Settle for Bad Data: Choosing the Digital Tax Tools that Fit Your Business and Growth Needs.
Spearhead a culture shift
Transparent data enhances the ability for the core functions of an organisation, as well as its edges, to perform to the best of their ability. Moreover, it cultivates company-wide collaboration and communication, as no one is in the dark about any operation. This openness and collective participation can bring unexpected efficiencies and benefits, as expertise and even soft skill sets can prove applicable in surprising areas. This culture shift can be spearheaded by the tax function.

To put the above steps into effect, successful tax leaders need to cultivate strong relationships within the wider organisation. This will not only help in fulfilling the short-term requirements of internal transformation but also equip the organisation to make further synergies further down the line.

Transformation Brings Results: Case Studies

The realities of digital-first business are a huge blessing for tax professionals because their specific departmental objectives are aligned with the more visionary transformational objectives of the business as a whole. More than ever, the right combination of strategic vision, software platforms, bespoke systems solutions, and change management can facilitate tax centres of excellence that play a high-profile role driving their organisations to thrive.

A good way to elucidate this is to take a closer look at how tax has played a central role in their organisations and not a peripheral one, as is too often the case:

Consistency in identifying spend: Multinational Media Conglomerate example

The relatively recent use of machine learning capabilities has proven an effective means to capture data, generating real-time analytics as a result. Spend can be monitored across projects, with inefficient spend identified at the point of submission and managed proactively, as opposed to being reviewed several months later.

For a multinational media conglomerate, this meant significant efficiency savings by enabling spend to be identified and tracked for tax purposes in real time. Machine learning was used to auto-categorise expenditure and build up a detailed “real-time” picture of the tax position, avoiding the traditional annual bottlenecks and time-consuming retrospective review of incomplete data. This in turn allowed automated generation of research and development (R&D) claims for the client.

Efficiency in accessing capital allowances: Retail Business example

Elsewhere, the ability to quickly produce capital allowance calculations with supporting documents covering plans, budgets, and relevant trends data, thanks to improved analytics capabilities, has significantly shortened decision-making timelines. This has enabled fixed asset additions to be identified and understood in “real time” rather than waiting for year-end when resources may have moved on.

This approach helped one retail business to build an automated process to build capital allowances positions through the year. Taking transactional and “master/standing” data to drive tax logic and automate capital allowance calculations to seamlessly feed into the client’s tax returns removed a significant period-end bottleneck.

A single view: Global Pharmaceuticals Company example

A range of businesses have realised material time savings and reduced tax liabilities thanks to the facilitation of a single global process, which is then handed over to a shared service team. These changes have provided our partners with a clear, single view of not just the expense side of their ledgers but also the income side.

One global pharmaceuticals company had a range of local outsourcing providers and was seeking to transition to a shared service centre model to better manage cumbersome and costly compliance arrangements. They worked with an external tax partner to help them implement technology to swiftly build a standard global process that integrated a number of source systems to feed data through consistently.

As a result, they were able to reduce their compliance cost and complexity base significantly, working with a single global provider for “last mile” submission whilst building their own capability in house and, at the same time, using technology to drive a step change in the insights they gained from their data.

Companies’ tax processes were previously highly decentralised and not at all standardised, but the type of transformation outlined above has significantly reduced levels of risk around both potential tax and legal liabilities. Transformation has also driven a change in how the function itself works—being able to spot and manage risks and opportunities in real time has enabled a more agile operating model, while access to richer data has improved insights. Today’s tax functions are making better decisions at speed.

Knowledge Is Power

Against widespread expectations of global economic contraction in the coming years, an organisation’s tax data provides a valuable window into its business operations, allowing it to find efficiencies and optimisations. Therefore, enacting one or all of the strategies outlined above can help position large organisations across the globe to maximise their growth.

Creating a meaningful plan for greater internal tax transparency and data use, combined with the right organisational culture and tools, can add immense value to a company’s global performance during times of volatility. Often, an external tax partner bringing the expertise in streamlining compliance processes means that your organisation’s tax department can divert both time and resources to more high-level, profit-driven, and strategic work.

Dive Deeper

Interested in how transparent data can foster collaboration between business functions? Read Leverage Tax Authorities’ Demands for Data to Align Tax, Finance, and IT.

Ryan Author:

Andrew Burman
Principal
Tax Transformation