Preparing For an Uncertain Future in Tax

Recent global tax developments have highlighted the inefficiencies of business processes that rely on manual work, including those that underpin tax and transfer pricing. At the same time, regulatory bodies such as the OECD continue to push forward initiatives aimed at reforming international tax systems. The demand for companies to ensure compliance, manage tax risks, and meet evolving reporting requirements—such as those related to the Global Anti-Base Erosion (GloBE) Rules and Qualified Domestic Minimum Top-up Tax (QDMTT)—has never been greater.

In a new whitepaper by insightsoftware experts, we explain the current state of play for tax and its close relative: transfer pricing software. We also examine the uncertainties that lie ahead in international tax regimes, the power that automation and analytics deliver to tax teams, and the outcomes of implementing tax software, which enhances the strategic contribution that tax teams can make.

The Growing Need for Tax and Transfer Pricing Software

The purpose of tax and transfer pricing software is to solve the challenges faced by teams who are still managing processes—such as forecasting and preparing year-end tax results—using manual methods or spreadsheets. The importance of such software has risen to the forefront for several reasons:

• The worldwide trend to reform tax regimes and regulations, supported by a growing demand for stronger governance in business.

• A general move toward transparency and real-time reporting within the finance function.

• The increased complexity of global tax compliance, including QDMTT reporting obligations.

• Demand from leadership teams for accurate data to support decision-making.

• The digitization and automation provided by modern technologies, offering easier ways to gather, categorize, and analyze multiple data sources as a ‘single version of the truth.’

• The need to proactively manage tax risks amid shifting regulatory landscapes and heightened scrutiny of transfer pricing practices.

The Great Global Tax Reset

All these trends are fueling what Deloitte calls the ‘global tax reset.’ They write: “The ‘global tax reset’—the environment of altered tax rules and public expectations spurred on by initiatives such as the OECD’s Base Erosion and Profit Shifting (BEPS) project—is causing tax leaders and other executives at multinational corporations to reassess their organizations’ approach not just to tax, but to how they choose to conduct business.”

The BEPS project includes more than 135 countries and jurisdictions, collaborating on the implementation of 15 measures to improve the coherence of international tax rules and ensure a more transparent tax environment. One key area of focus is the introduction of QDMTT as part of the OECD’s Pillar Two framework, which requires businesses to navigate new compliance challenges while ensuring they meet minimum tax obligations.

Another driver for global change is the OECD’s Forum on Tax Administration (FTA), which has published a discussion document called Tax Administration 3.0: The Digital Transformation of Tax Administration. “Digital transformation of tax administration is a journey that will take many years,” says the FTA, “and requires many pieces to fit together to realize the full benefits. This includes co-development of many of the building blocks of future tax administration with other parts of government, with private sector actors, and internationally.”

What Does This Mean for Tax Teams?

Just as modern finance departments are assuming more responsibility for elements outside their traditional remit, tax and transfer pricing teams have an opportunity to add greater value beyond preparing forecasts and reports. Some of the ways they can do this include:

• Reducing risk in the tax filing process, whether fiscal or reputational.

• Managing QDMTT compliance efficiently while ensuring accurate reporting.

• Improving overall financial reporting and forecasts.

• Standardizing financial information to enable real-time reporting and access.

• Supporting advanced analysis by senior leaders to inform business strategy.

Yet as Luis Coronado, EY Global Tax Controversy and Transfer Pricing Leader, writes in his report Five Ways Tax Risk Is Rising – and How the C-suite Should Respond: “Despite the recent surge in C-suite interest and oversight of tax being fully warranted, many companies are unprepared to respond to higher tax enforcement: just 24 percent say they have full visibility of all their tax audits, disputes, and litigation globally, and less than four-in-ten are protecting themselves against transfer pricing risks and extra costs.”

How Tax Teams Can Use Software to Become More Strategic

Tax teams play a critical role in explaining the benefits of investing in tax and transfer pricing software, especially to organizations that have yet to adopt these solutions. A good place to start is with the fact that talented professionals in the team may not be using their time to their best advantage.

A recent survey by EY of 100 of the largest multinational companies found that while tax functions are planning to invest heavily to close the data and technology gap, most companies surveyed still spend 40-70 percent of their time on data cleansing. The three most common tasks undertaken as part of data cleansing include:

• Splitting accounts, cost centers, and profit centers.

• Making central group to local subsidiary GAAP adjustments.

• Splitting data into correct locations or jurisdictions.

The right software platform can help tax teams and the companies they work for transform the tax function. Armed with the right software, tax teams can ensure they are in the best possible position to prepare for the future and attract skilled professionals who can leverage new technologies. That’s why Longview Tax by insightsoftware enables companies to:

• Close faster while reducing dependencies on other departments.

• Eliminate the costly consequences of error-prone manual tax management.

• Establish a single source of truth that promotes consistent, strategic analysis.

Read About Longview Tax and Transfer Pricing

While many of the initiatives outlined in our whitepaper have yet to be revealed in all their detail, one thing is abundantly clear: significant change is on the way, and being as prepared and as flexible as possible will pay huge dividends.

Contact us to find out more about Longview Tax and Transfer Pricing from insightsoftware, download our new whitepaper, or arrange a demo.