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Home » Tax » Put tax at the heart of digital transformation decisions

Genevieve Watson

Tax Partner, Deloitte UK

Tax runs through the heart of every business process and so must be central to discussions around moving to a new Enterprise Resource Planning (ERP) in the cloud.

What has been the impact on tax of digital transformation and companies moving to the cloud-based ERP systems?

It’s providing the perfect opportunity to ensure tax is embedded into an organisation’s data management, processes and systems set-up, enabling tax to achieve the right first time pinnacle needed in today’s digital tax environment.

Many companies are now going through a period of digital transformation and updating their legacy ERP systems and moving to the cloud. Tax needs to seize this opportunity to ensure it’s factored into the design from the beginning.

Tax runs at the heart of every business process and so cannot be an afterthought if organisations want accurate figures and to be compliant across tax regimes globally.

How does this change the boardroom discussion around tax? What sort of questions does the C-suite need to be asking to ensure an organisation’s digital transformation considers tax appropriately?

The best advice is not to just consider whether a new ERP in the cloud will be able to handle tax, because it almost certainly will have the potential capability to do so.

The key is that functionality needs to be designed and configured in the right way for each business – it’s not, unfortunately, a case of just ‘plug in and play’.

We’re not just dealing with corporation tax, there are taxes on employees’ wages, VAT, customs and, in some cases, excise duty, to name a few.

As such, it’s not just about the tools and features so much as making sure the tax function is present along the transformation journey, shoulder-to-shoulder with the whole organisation and thus ensuring tax is embedded into the design from the beginning. If it is not, you run the risk of transformation happening and tax still being in the same position – or, potentially, a worse position.

In the past, that hasn’t been such a huge problem, as tax had time to ensure things were fixed outside of the system before a declaration was made with tax authorities.

Now, though, the tax authorities are going through their own digital transformation and that is changing how they expect organisations to deal with them, meaning there is no time to make corrections. Data, processes and systems must be right first time.

Why is this digital transformation at tax authorities having an impact? What changes does it make to how an organisation approaches the function?

Tax authorities have traditionally relied upon taxpayers to self-assess their liabilities, and the competency of the data, processes and systems underpinning their business. This has led to gaps arising as a result of data, processes and systems not being designed with tax in mind.

Change is on the cards: tax authorities are now required to up their game after being forced by governments and agencies such as the OECD (Organisation for Economic Co-operation and Development) to address these gaps. In order to do that, they have decided to go digital.

They’re progressing well in their endeavour with many tax authorities now leap-frogging taxpayers by acquiring data specialists and innovative technology. After being under-resourced and in the technology dark ages for years, they now find themselves ahead for the first time in history – demanding more data, real-time reporting and electronic invoicing.

Tax therefore needs to respond to this changing landscape by addressing its data, processes and system set-up to ensure it meets its global tax compliance requirements. Tax needs to leverage the transformation journey the organisation is already going on when moving to a new cloud ERP, such as SAP S/4HANA.

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