The availability of advanced data management solutions means organizations can collect, store, manage, and analyze more tax-related data faster than ever before. Access to accurate tax data has a ripple effect throughout the organization, increasing expectations for rapid insight and transparency. As a result, tax professionals around the world are refining their practices, strategies, and technologies to give their departments, broader finance departments, and businesses real-time, transaction-level access to tax data.
Achieving these goals may require significant time and financial resources. This means that tax professionals need to bring together the right capabilities, in terms of technology platforms and employee expertise, for the right reasons, to create the most value for their organizations and clients. This article outlines his Deloitte approach to designing tax data management systems that can achieve these goals.
Multiple factors are increasing data management risk
Deloitte has helped organizations of all sizes design and implement tax data management systems. The first step is to develop a common understanding of the factors behind changes in tax data. We then identify and anticipate technical and organizational barriers to change adoption and agree on a long-term approach to maintaining and expanding tax data management capabilities in response to regulatory and business trends.
First of all. Several factors are driving the growth and importance of tax data management.
1 Ongoing technology and digital transformation
Digital solutions such as advanced ERP systems, advanced data management tools, and cloud-based applications play a key role in shaping the tax data landscape. These technologies improve data accuracy, enable real-time reporting, improve compliance efficiency, and facilitate better planning.
2 Regulatory changes and tax authority requirements
Global tax changes and changing regulatory requirements, such as the global minimum tax under OECD Pillar 2 and e-invoicing, are making tax data management even more complex. Tax departments need to adapt to these changes and ensure they have the data elements they need to stay compliant. Similarly, tax authorities are increasingly demanding greater transparency and are moving towards digital tax management. This includes requiring more data more often. This trend will encourage organizations to invest in more robust tax data management systems.
3 Expanding global economic opportunities
In addition to increasing profitability, the strategic goals of most organizations include increasing revenue. Doing both could include expanding into new markets and jurisdictions, especially now that many of the supply chain issues of the past decade are being resolved. However, as you expand geographically, tax data management becomes more complex as you need to understand and comply with a wider variety of direct and indirect tax regimes and legal requirements.
4 Evolving business model
Changing business dynamics and models can result in new tax data requirements. In addition to expanding their reach into new markets (and tax jurisdictions), organizations that add products and services may face different regulations related to these new services. Changes in business models can also have tax implications. For example, companies that previously licensed services may move to a subscription service model. This may require taking data on a minute-by-minute basis and aggregating that data while tagging it with geosourcing to recognize revenue in the appropriate jurisdiction.
5 Widespread adoption of remote work practices
The coronavirus pandemic and the resulting shift to remote work will result in employees living and working in different locations. This can have tax implications for taxpayers and organizations, and the value of digitized and automated systems and processes to ensure that tax functions continue to provide the best possible service to organizations. will also be highlighted.
These trends are prominent drivers of the need for better data management, but other trends will emerge in the future.
Managing tax data effectively is an ongoing challenge for tax departments
These dynamic trends create complexity and opportunities for tax professionals. The only thing that remains constant is adopting a data management strategy that supports your organization, ensures compliance today and in the future, and puts in place capabilities that deliver efficient and effective results that support your organization's goals. This is further pressure on tax departments not to take action. In Deloitte's experience, when a tax professional invests in data management systems and capabilities he needs to keep in mind three challenges:
1 Anticipate how to handle data growth and consolidation
Future-proofing data management capabilities and capabilities are critical. Many of Deloitte's customers are now augmenting traditional data warehouses and databases with data lakes that can process all types of data, including unstructured and semi-structured data such as images, video, and audio. . Given the amount of data generated, these will play an increasingly important role in tax departments. According to calculations by Gartner, a US technology research and consulting firm, 57% of data and analytics leaders have invested in a data warehouse, 46% are using a data hub, and 39% currently I'm using a data lake.
Regardless of the mechanism, effective integration requires investment in a scalable, high-performance data management solution. Deloitte research shows that integrating tax-related data is a top priority for more than a third of respondents in a recent survey of tax professionals, compared to just 10% of respondents. (see Figure 1). Future integration of generative AI tools into an organization's infrastructure will build on the return on investment of these data approaches and further leverage that investment to support business growth.
Figure 1: Tax departments’ biggest challenges over the next 3-5 years
Source: Deloitte Tax Transformation Trends 2023
2 Built-in flexibility to quickly respond to regulatory changes
You should always pay attention to changes in tax laws and regulations. OECD Pillar 2 may result in the need to identify and capture new data elements for global minimum tax calculations and electronic invoicing adopted by affected jurisdictions. This presents new challenges for tax functions and their ability to manage tax-related data in conjunction with business and information technology.
3 Focus on real-time reporting
The most important goal of modern data technology is to enable real-time reporting and access to tax data. Since tax reporting is driven by transactional data, it must be tightly integrated with the organization's digital architecture, such as a higher-level ERP solution. Tax data requirements should be built into the critical processes designed and built for your business. This facilitates efficient monitoring and reporting and ensures that stakeholders have access to accurate and up-to-date direct and indirect tax information.
By anticipating and addressing these challenges, leaders can identify the best tax data automation tools for their organizations and deliver real-time insights that build trust among all stakeholders, from executives to regulators and investors. and generate reports. The ultimate goal of an organization is to improve its reputation and credibility.
Three elements of tax data management: strategic investment, training, and maintenance
Implementing an advanced data management system helps tax departments and Organizations need to become more tax-aware and responsive, but reaping these benefits requires continued effort. As such, Deloitte recommends that leaders in tax organizations view their data management strategy as targeting three distinct but related goals:
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Investing in innovative solutions.
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Recruit and train data-savvy talent.and
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Maintain robust, up-to-date functionality.
1 Invest in the right tools and technology
There are a wide variety of data management solutions (and providers) to choose from, so it's important to know your tax organization's end goals when making your selection. Data automation and management tools are needed to streamline operations, promote transparency, and unlock innovation and the potential of tax data. For example, Deloitte's Intela platform is designed specifically with these goals in mind, enabling tax professionals to make data-driven decisions, optimize tax strategies, and help ensure compliance. The same goal can be achieved using many different technologies. Some can be licensed across your organization or through specific solutions tailored to your tax needs.
2 Incorporating data skills into talent management and development
Organizations must train tax professionals on both new tax laws and regulations to ensure compliance and Data management strategies used to achieve compliance. Tax departments are updating their talent acquisition and development strategies to improve data management and technology skills, as well as incorporating robust ongoing training to improve their tax data management platforms and digital transformation in general. You can get the maximum return from your investment. A survey of tax professionals by Deloitte found that many tax departments are prioritizing data management, with 44% citing data analysis, data-driven strategic insights, and It became clear that data management was cited (Figure 2).
Figure 2: Skills are most needed in tax departments
Source: Deloitte Tax Transformation Trends 2023
3 Commit to maintaining a robust tax data management governance structure
Data management strategies and governance structures help maintain a consistent data architecture and strengthen the value of technology in analytics and reporting. This is often or can be done in conjunction with the company's IT function and data governance program. Data and technology never ends, so it's important to keep moving forward to achieve maximum value for your investment.
An effective tax data management strategy must be based on a deep understanding of the business context in which tax data management exists, both globally and across the enterprise, and the goals of regulators and customer organizations. This ensures that investments in data management address specific needs and provides finance and tax executives with unprecedented insight into a company's global tax position, risks, and opportunities. Using the invest, grow, and sustain approach outlined here, organizations can achieve real-time reporting, increased tax transparency, increased data reliability, efficient compliance, and ultimately better tax results. and financial reporting.