Navigating tax compliance’s complex transition to digital
by Bija Knowles
If your tax colleagues seem stressed, spare a thought, as they are “under pressure like never before”, according to the 2018 European Tax Technology Survey by Thomson Reuters. With increasing regulation, the transition to digital processes, as well as the move towards real-time reporting, tax professionals having to make strategic decisions on how to adapt to the changing landscape.
The report notes that “it is hard to see how the tax department of the near future will continue to operate effectively without either significantly increasing headcount, or moving away from spreadsheets and manual processes to adopt more sophisticated tax technology.”
Increased regulation
Keeping up with new regulations and processes was the main challenge for 46 per cent of the survey's respondents, although nearly as many also mentioned managing compliance across multiple jurisdictions. Around a third of respondents said the following were their main challenges:
- Implementing tax technology and transformation projects
- Need for increased efficiency — internal processes or workflow
- Managing tax data
- Increasing scrutiny from tax authorities
Although corporate income tax (CIT) rates have decreased in some Western countries (notably the US and UK), corporates feel that pressure has increased, with more regulations and governments requesting more data, as shown in the graph below.
Manual processes still prevalent
The survey also found that 46 per cent of the survey's respondents are managing tax compliance across multiple jurisdictions and already have a shared service centre to manage tax processes for multiple jurisdictions/subsidiaries. However, 38 per cent manage all tax compliance locally and have no plans to change that.
More than half of the respondents (54 per cent) said that the current adoption of tax technology is 'intermediate', with some areas using tax solutions although there is continued use of manual processes and spreadsheets. Only 6 per cent said their tax technology was 'advanced', with most processes covered by tax technology. The graph below shows what types of tax compliance technology companies are using:
Embracing technology
While security is the number one priority for new tax compliance technology, many companies are exploring and embracing the different types of technology now on offer in the tax compliance space. A third of companies surveyed said they are already using cloud-based tax technology and the graph below shows which types of technology companies are considering using.
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