Tax reporting

The major element in the transformation of the tax function

The tax environment is changing a little more every day: transparency issues with Country-by-Country reporting (CbCR) which will soon be public, increased pressure from tax authorities via tax audits, increasing data sharing with tax authorities, time reporting (the first use case with electronic invoicing), reputational risks and exacerbated political risks. In addition, there are supranational tax regulations with the future adoption by the EU of the Pillar 2 Directive…

All these elements militate to transform the functional profile of the tax expert. In this transformation, he can rely on tools to help him focus on new tasks with more added value.

 

Compliance and risk management as a driver of transformation

While the digitalization of the finance function is now well advanced, the tax function is also moving in this direction, under the impetus of multiple factors. These factors are firstly external, with the increased pressure of regulators, the search for greater tax transparency, new regulations aimed at limiting tax planning or the pressure of States regarding tax revenues. The factors internal to the company, such as the search for operational control, the transformation of the finance function, changes in business operating models, or the increased use of digital tools for more visibility and control, also engage the tax function in a profound transformation.

In this context, compliance is becoming a strategic issue for French companies with an international presence: managing several countries, several service providers, following local regulations in constant evolution… All this is a complex and costly exercise. Compliance with these compliance obligations requires the implementation of a reliable and standardized process, leading companies to acquire management and reporting tools to limit risks. These tools also provide reliable tax data that can be used in making tax or operational decisions.

Compliance also requires reliable and standardized monitoring at every stage of the tax compliance process, from data extraction to filing of the tax return. This involves the deployment of collaborative real-time management tools for centralized management of tax returns. However, tools alone are not enough and must be accompanied by training of teams, to allow a real automation and reliability of tax compliance processes, with tangible results a reduction of risks, time saving and cost control.

 

Drive to control and achieve operational efficiency

Executives are looking for operational efficiency, through unified reporting and real time analytics - 90% of them consider Artificial Intelligence to be a business opportunity for their company (BCG, 2019). The general management is increasingly demanding reporting elements from the tax function, these elements being increasingly accessible - we are talking about real time analytics. This reporting has an efficiency objective: it must enable steering and inform decision-making through reliable data to optimize and align the tax strategy with the group’s operational strategy.

It also meets the objective of a management dialogue with the auditor but also with management, because it allows to go down to the operations, thus giving a very good vision of the tax elements that are to be traced to the auditor. Indeed, the authorities are increasingly going down in detail to verify transactional data and identify weak signals, beyond the declarative. It also allows the group to identify tax risks across the various subsidiaries and jurisdictions and thus allows it to be reduced by actions to be taken or to steer the various phases of procedures.

The criteria for choosing the tax reporting tool

To effectively manage tax processes and data, the tool must be selected according to certain criteria:

  1. The tool must be accessible and business-oriented. It must provide key information and be easy to use to facilitate its adoption by tax teams; without the latter having to delve into the excel files in depth and work on consolidation.
  2. Data visualization is an important choice criterion: it must make it possible to easily analyze information according to desired criteria, facilitate decision-making and the implementation of corrective actions.
  3. The tool must maintain a process and transactional logic that makes it possible to follow the various compliance or declarative processes but also to collect information in a fairly natural way and identify audit trails of all the tasks performed and to realize. 

Changes in the tax function

The tools of the tax function make it possible to free up time on tasks with greater added value. This is a step in the transformation of the tax profession, which promises to be even deeper. In the future, the major challenges of the tax function and the evolution of the role of the tax specialist go towards the calculation of tax in real time. In this context, the automation of treatments and the control of systems are key challenges for the coming years. Tax reporting is only one step among others that tax specialists must take in the coming years. They all revolve around mastering data and seeking profitability with the challenge of doing more with less.

Access to data, their extraction and analysis, is therefore the key issue of the tax function for the coming years. However, it is important that tax professionals take an active part in their transformation and management decisions, in particular to understand information systems, participate in their design and create algorithms and tools that will be necessary tomorrow to adapt to the challenges of Artificial Intelligence. Upskilling teams and their conversion to change are also key.

Also, tax reporting must be able to help tax professionals rethink their functional role with increased capacity. The choice and implementation of a reporting tool must be done at the right time, by asking the question of the competitive context of the company, its tax history, tax policy and management. The tool must fit into the broader transformation roadmap and be only one step.

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