Tax teams in multinational groups are currently grappling with an array of challenges in the realm of data collection and management. Tax functions must adapt and evolve in this era of rapid technological advancement where data has become a driving force for business decisions.
Data challenges for the modern tax function
Tax teams face mounting pressures to manage and harness data effectively in the fast-paced business landscape. BEPS (Base Erosion and Profit Shifting) Pillar Two regulations present one of the most notable challenges.
This newly emerging tax framework demands meticulous data collection and reporting. However, BEPS Pillar Two is just the tip of the iceberg. Tax teams are also confronted with intricate regulatory regimes, such as Controlled Foreign Company and transfer pricing rules. These regulations necessitate extensive data sourcing, encompassing financial and non-financial data alike.
A noteworthy hurdle is the varying granularity of financial data required for tax disclosures. This variance adds another layer of complexity, making the tax function a perpetually “business as usual” task.
An essential aspect of overcoming data challenges lies in comprehending the diverse data sources indispensable for tax compliance. These sources encompass data generated by the business itself, including transaction details for indirect tax returns and employee remuneration data for corporate income tax calculations.
To effectively address this challenge, tax teams must categorise data sources and establish efficient mechanisms for collecting, updating, and storing the data.
Here are three vital questions to guide you:
- What tax obligations are pertinent to your organisation? By listing these obligations, you can identify shared data sources and their ownership within or outside the tax department.
- Who are the key stakeholders in tax compliance? Encompassing finance, legal, tax, and data owners from various business units. Identifying stakeholders and the data they possess aids in understanding direct or indirect tax usage.
- How is data currently being collated? Assess your existing processes and expand successful methods to other areas. Leveraging past successes can create a foundation for future improvements.
People, process, technology: The threefold approach
Effectively tackling data complexities requires a holistic approach involving People, Processes, and Technology. Engaging with stakeholders, understanding data processes, and leveraging appropriate technology are key factors in this equation.
- People engagement: Collaborating with individuals beyond the tax realm, such as finance teams, is essential for obtaining necessary data. Effective communication and change management ensure data owners grasp the importance of data collection and provision.
- Utilising a data store and process mapping: This repository is a single point of truth, housing critical information and definitions for different tax regimes. Additionally, Process Mapping helps comprehend, document, and refine tax processes, eliminating redundancies and ensuring alignment with best practices.
- Building a data management roadmap: This roadmap outlines steps to unite internal teams, analyse existing processes, and devise a comprehensive data strategy to meet future tax requirements. Leveraging technology, like the CCH Integrator, can significantly enhance data collection efficiency and future-proof the tax function.
Integrator empowers tax teams to thrive amidst the ever-evolving international tax landscape. As we venture further into the data-driven tax world, the ability to adapt, collaborate, and harness technology will define the success of the modern tax function.