Financial professionals often say they feel overwhelmed by their compliance workload – but a report by The World Bank Group and PwC suggests that companies are actually spending less time on tax compliance and are making fewer compliance-related payments. Much of this simplification is due to use of technology by business and government, according to Paying Taxes 2018, which studied 190 countries. It found that companies reduced their compliance time by five hours to 240 hours; and the number of payments by one to 24 payments.

Technology driving tax efficiency

Most of the time and process savings come from the increased use of electronic filing and payment, improved tax and accounting software and pre-populated returns. PwC's Andrew Packman said: “Technology’s impact on reducing the administrative and cost burden of tax is almost universal this year in our findings. In particular it is now embedded in driving simplification and time-saving for business. The increasing use of real, or near real time data is changing how tax authorities can use data, and analyse returns. This does however raise questions about data integrity and security and about how businesses can meet the increasing data obligations placed upon them.”

Cash flow delays

However, the report also noted that the post-filing processes for value-added tax (VAT) and corporate income tax (CIT) returns, which are considered in the study for the second year, can be amongst the most challenging and lengthy processes for businesses to comply with. In some cases, the length of the processes can create cash flow and administrative delays for companies of more than a year.

Tax in real time

The report found that, despite sizeable changes in the global average results, many economies, particularly in the lower income range, have been slower to take full advantage of the benefits of technology. The study also notes an increase in the use of real, or near real-time information systems by tax authorities to track transactions, for example in Russia, the Republic of Korea and China. The report stated: “Real time data is giving tax authorities the opportunity to scrutinize transactions on a near real-time basis rather than relying on reviews of annual tax returns. New real-time systems may add to compliance times as they are first implemented, but they have the potential to lead to fewer audits or to faster VAT refunds in the future.”