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GlobalVATOnline

Monitoring the tax impact of changing supply chains By Alex Clifford

The COVID-19 pandemic, Brexit and other geopolitical events such as the drive to Net Zero have led organisations to reassess their supply chains and ask how they can future-proof them for rapidly changing environments. 

As organisations find technology-enabled and dynamic solutions to these problems, how can tax functions use these tools to monitor the impact of changing supply chains and future proof themselves?

How can future proofed tax departments respond to supply chain changes?

They can typically look to perform 2 roles:

  1. Form part of multidisciplinary teams discussing supply chain changes - they can help to assess business model and supply chain changes as they are being designed and assist with translating multi-jurisdictional tax legislation.
  2. Proactively monitor sensitive supply chain data - they can use sophisticated control systems that monitor supply chain transactional data and report where business changes may create a tax headache in the future (e.g. trigger a taxable presence in a new country).

How to make this happen in your business

To get this right, you need the right technology and experts to help you put the right operating model and processes in place. A great starting point is to carry out a low cost, quick trial using a technology platform such as Edge - our single solution to manage the complexities of global indirect tax compliance reporting. 

Technologies like Edge can run regular checks on your data to identify the following:

  • New patterns of activity e.g. new suppliers, new cost centres - Are you expecting these?
  • New data sets e.g. new countries we are importing from - Could this trigger a taxable presence that you were not expecting?
  • Inconsistent/missing data e.g. do we have incomplete data for our new suppliers that may cause you a headache in terms of tax documentation and filings?

All of these analyses are invaluable, particularly in times where supply chains are being disrupted, resulting in changes to suppliers and dispatch locations with less planning time than normal. 

Not only do these analyses provide tax teams with the data they need, they also provide supply chain colleagues with insights into their real-time business operations. Ensuring cost efficiency, enhancing monitoring and control, and ultimately giving  greater confidence in filing positions and tax authority risk ratings. 

We recommend this technology to our Integrated Compliance clients, as we know the value these tools and insights can bring, alongside having specialists on hand to help you translate these. Plus, delivering these insights alongside your regular compliance process ensures an efficient and real-time monitoring system.

Ultimately, dealing with rapid changes in supply chains is never going to be simple, but with the right technology and partners it can be made easier. Putting tax data at the heart of these decisions, ensures that you can adapt quickly to changes and support the business in making the right supply chain decisions. 

Why tax data quality is the oxygen of a thriving tax function

We operate in a world where everyone wants your data. Apps, websites, social networks - wherever you look data is being collected, analysed and more often than not, monetised. Data has become the air organisations breathe, to make better business decisions, understand customers better, drive efficiencies and model future trends. And like the air we breathe, quality is vital. Good quality data that an organisation can trust is vital and makes a significant difference to the health of a business.

Chief Data Officers are asking finance and tax functions to not only create data but ensure it is fit for purpose, meets standards and supports the organisation’s strategic goals. To do this, there has to be a good understanding of what data is important, how it enables processes, how people interact with it and, perhaps most importantly, the complexities of how to measure it. The value of this knowledge is tangible; good quality data is an asset for any business and can be put to effective strategic use.

At the other end of the scale, organisations working with low quality data suffer with inefficiencies and additional costs. Time is spent cleansing, correcting, manipulating and reconciling data rather than generating insights or informing critical decisions.

There is a clear and coherent business case for good quality data in any organisation.

Get your data right and you can:

  • improve your bottom line by eliminating wasted effort
  • more easily monetise your data
  • make the most of emerging data sciences
  • comply with the increasing number of requests from tax authorities
  • share meaningful business insights with the C-Suite as well as describe the benefits of greater efficiencies and smarter working.

The benefits of good data quality are already being enjoyed by many businesses, but others are mid-journey and some have yet to start.

A word of warning. Changing something as fundamental to an organisation as data quality and attitudes to that data, is far from easy. It certainly isn’t just about having the latest technology. To take full advantage of treating data as a valuable asset, you need people, both in-house and external, with experience, vision and expertise to identify, guide and advise as a new approach is developed.

We recommend a methodical, trusted approach in the form of a tax data quality assessment. This analyses your current state of data, articulates where you want to be and what needs to happen to get you there. The assessment will also help inform the data, process and system roadmaps and essential features of an operating model that creates good tax data.

The final outcome will vary from business to business and the improvements will differ depending on the starting point. But one thing is certain. Just as good air quality enhances life, so good data quality enables more incisive insights and better business decisions.

Is it time for you to take a deep breath and make a change?

For further information or assistance, please contact the author Alex Clifford - email: alex.clifford@pwc.com

Continuous data monitoring - friend or foe?

CCTV has made us familiar with the concept of being watched 24/7. Some find it intrusive, others find it provides a sense of security. But what about being monitored through your organisation’s data? Governments around the world are turning to technology to ‘watch’ your organisation through continuous data monitoring. And businesses need to embrace it to maximise the benefits and minimise the risks.

In a finance function, continuous data monitoring is exactly what it says. It’s a means of reviewing the data going into a system, checking it and using analytics to gain valuable business insights. All in real time. There is no month end pain - words that many working in a finance role greet with rolling eyes and a loud sigh.

Month end traditionally means data cleansing, correcting, manipulating and reconciling. Plus long hours, complex spreadsheets, summaries and a lot of frustration along the way. However a few, usually people working in larger organisations, will have an experience more akin to, “Month end? What’s the big deal?”

Behind the two contrasting responses lies an acceptance of the need for transformation. There are multiple drivers:

  • Governments are becoming more sophisticated in how they collect and combine financial data from different sources and apply their own algorithms and analytics to tell a story.
  • Tax authorities are increasingly requiring data to be provided in real time.
  • The growing transparency agenda where news platforms continue to highlight perceived underpayments of tax.
  • Challenges of unreliable data tax departments have to work with.
  • C-suite calls for meaningful business insights, greater efficiencies and smarter working.

It’s no surprise that companies are having to rethink how their finance functions operate. Being able to continuously monitor tax data, to look for and correct errors in feeding business processes in real time is becoming a fundamental capability for any business. This is exactly what more and more leading businesses are doing...and enjoying the many benefits that come with that.

Evaluating tax relevant business data in real time enables a tax function to apply tax sensitive rules to that data and correct errors as they emerge. Alongside the right processes and controls, this brings greater confidence in filing positions and tax authority risk ratings. It also contributes to cost efficiencies, enhanced confidence in transparency and ultimately reputation as your data tells the right story. For those battling with traditional month ends, continuous data monitoring frees them from that grind. It opens up time to focus on complex technical issues and analysis of business relevant insights. Not only are your highly skilled people doing the right level of work, they’re happier too.

Adopting a continuous data monitoring approach isn’t an easy step to take. It’s not just having the right technology, you’ll need experience and a little expert help to build an ERP to meet the needs of all finance functions, including tax. A great starting point is to carry out a tax data quality assessment. This will highlight any compliance inefficiencies, value loss and control failures. It can also help a tax function define its data, process and system roadmaps and build an operating model to continuously monitor tax data. What that looks like depends on the organisation, but can range from getting the most out of existing technology to implement continuous monitoring, to providing managed services to monitor data for them.

Ultimately, continuous data monitoring is a win, win for business. Making data your friend means getting it to work beneficially for your organisation, leaving you to sleep well at night without worrying what story it’s telling the government.

For further information or assistance, please contact the author Alex Clifford - email: alex.clifford@pwc.com