The concept of digitising functions and processes has been very much on trend in financial departments of larger companies for many years. Compared to other transaction-related financial functions, tax functions have so far been relatively unaffected by this development. However, it is expected that this will change rapidly in the near future.
Digitising tax functions will lead to automated end-to-end processes that support tax compliance and consultancy. Furthermore, companies will be able to file tax reports “at the push of a button”. Tax departments will therefore be able to implement automated validation procedures (for example, for VAT purposes) or to use mass data of companies for tax purposes. This will enable a high degree of transparency. Officials will also be able to use this digitisation to find better ways of ensuring compliance with tax law requirements and avoiding tax risks.
Officials will also be able to use this digitisation to find better ways of ensuring compliance with tax law requirements and avoiding tax risks. Given the large number of different taxes, such as indirect taxes, income tax, corporate tax, and international taxes, a comprehensive IT tax strategy with individual characteristics for each tax type must be developed.
An important step in digitising tax departments is assessing and selecting the IT solutions to be deployed in accordance with the overall strategy, as well as establishing a “digitisation roadmap”. In addition to the technical implementation of the IT solutions, the processes and organisation must be adapted to the tax function. The rapid digitisation of corporate processes, thus, offers both opportunities and challenges for the tax function.
- Automating tax processes using automated data interfaces and intelligent IT solutions.
- Improving efficiency in tax consultancy by using intelligent digital support that helps to allocate and respond to tax queries (for example, enquiries from operational business teams, back office functions or external stakeholders such as tax auditors or tax authorities).
- Using artificial intelligence can ensure increased compliance and quality in tax matters, as well as improve a tax organisation’s services, taking into account increasingly digitised and automated business processes.
- Ensuring high transparency and short response times through tax reports and evaluations regarding relevant figures, risks, workflows, etc.
- Taking primary control of the tax processes and results by using management information systems that allow for direct, centralised management of activities and results for various digital tax processes.
- Gaining complete, centralised, real-time access to tax-relevant data and the tax function’s global activities.
- Digitised, tax-relevant processes and systems automatically generate huge amounts of data, which must then be processed for tax purposes.
- Tax controls and governance must be put in place for this data in order to ensure the tax-relevant data provided is correct.
- Digital business models and the associated rapid change in business activity and processes require a fast response from the entire company. This also includes the tax function, which must be able to provide advice and information at short notice in order to support digital business processes as much as possible.
- Digitised processes bring about new tax-related issues, which must be solved efficiently and any tax-related consequences determined promptly. It is therefore essential that the tax function is agile and flexible. It must not be hampered by manual processes.
- External stakeholders such as tax authorities are making use of new technologies and analysis options. Tax administrators expect the tax function to meet tax-related legal requirements, in particular, within highly automated digital processes in which they implement sufficient processes and controls. Furthermore, the tax authorities are increasingly expecting digitised processes to be used for tax compliance (such as electronic tax declarations or electronic information updates).
In this environment, it is of the utmost importance that the tax function takes a proactive role in this digitisation process – this is the only way it can become a significant stakeholder in digitised business processes. The tax function must also change its own operational and organisational processes if it is to cope with the challenges ahead. If it does so successfully, it will benefit extensively from the opportunities offered by digitisation in terms of improving its own processes.