Transforming the tax function through technology

Transforming

the tax function

through

technology

A practical guide to 2020

KPMG International

April 2018

This report was ﬁrst published as Transforming the Tax Function in

China by Lachlan Wolfers, Head of Tax Technology for KPMG China,

and Alexander Zegers, Tax Technology Director, KPMG China. In its

current form, this publication has been expanded upon to provide

a global context and bring insights to audiences around the world.

Please note that KPMG China is a limited liability partnership and

one of the global network of independent member ﬁrms afﬁliated

with KPMG International Cooperative (“KPMG International”).

Contents

Part A — Introduction — before we begin 2

Use of this publication

Themes — Helping to understand the problem

A critical framework

Technology helps

Most change will be incremental

Technology goals need to be realistic

Part B — Now let’s begin our journey

Section one — Why transform?

The additional X factor — Supercharging your technology investment

Enhanced data collection and use of technology by tax authorities

What may hold back investment in tax technology?

Section two — What should you do?

Category one — Automating the tax compliance process

Category two — Solutions that provide greater insights

Category three — Process management solutions

Category four — Accessories, components and infrastructure

Section three — Who should help you do it?

Section four — How should you do it?

Part C — A glance into the future

Intelligent automation technologies

Stage one — Basic process automation

Stage two — Enhanced process automation

Stage three — Cognitive automation

What this means

Distributed ledger technologies (i.e. blockchain)

Conclusions — Putting it all together

Glossary of terms

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.

Part A —

Introduction —

before we

begin

It is vital to remember that the use

of technology in a tax function needs

to serve a purpose beyond merely

the use of trendy new gadgets or

following the lead of others.

Transforming the tax function through technology

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated. © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.

An Australian journalist described the world as being “in a

moment between technology and techno-panic”.

This is

the idea that we are both excited about and fearful of what

the future may hold for us in a world where technological

developments are on the precipice of a revolution, one

that is increasingly being referred to as the fourth industrial

revolution. The onset of this revolution has left many tax

and ﬁnance managers feeling anxious about being left

behind and uncertain of where to start. Indeed, the term

‘disruption’, which is so commonly bandied about to

describe the effect of this revolution, evokes images more

associated with fear than with education and opportunity.

The goal for this publication is to provide tax and ﬁnance

leaders with a foundation for transforming their departments

and increased conﬁdence in embracing technology and the

beneﬁts it can bring for managing and evolving the modern

tax function.

There are now many publications in the market that discuss

the ‘Tax Function of the Future’, and they typically describe,

in ambitious terms, how to transform a tax function by taking

advantage of technological developments in ﬁelds such as

artiﬁcial intelligence, robotic process automation, blockchain,

machine learning, and augmented and virtual reality. Often,

these publications fail to set a practical foundation that

enables tax leaders to build on the current strengths of their

tax departments, veering too far into the realm of ‘techno-

rapture’, which can have the adverse effect of sending readers

into ‘techno-panic’.

This publication focuses deliberately on the immediate

future — that is, the next 2 to 3 years. This publication is

founded on the premise that, for many in-house tax functions

today, the most common form of technology used to manage

their tax compliance processes relies heavily on Microsoft

Excel spreadsheets. In the best of cases, these spreadsheets

are stored on some form of commonly accessible drive

within the organization, but in many cases, they are housed

in disparate parts of the business. Most tax functions of

medium and large organizations still employ large numbers of

people whose roles are very process oriented. For example,

they may manually issue Value Added Tax (VAT) invoices,

engage in fulﬁlling repeated requests for information and data

from within their own organization‘s business lines, and/or

make adjustments or reconciliations between their ﬁnancial

statements, their tax returns, their Enterprise Resource

Planning (ERP) systems, and the ﬁling systems of the Tax

Authorities of the countries in which they operate.

‘How to ensure Australia thrives when the robots come,’ Peter Hartcher, Sydney Morning Herald, 30 September 2017, smh.com.au/comment/how-to-ensure-australia-

thrives-when-the-robots-come-20170929-gyrgr9.html

‘Designing an Indirect Tax Function which is Fit for the Future,’ KPMG International, 26 September 2016, https://home.kpmg.com/xx/en/home/insights/2016/09/

designing-an-indirect-tax-function-that-is-fit-for-the-future.html

This publication is founded on a core belief that to transform

an in-house tax function with technology, tax departments

need to ‘walk before they run’. To transform an organization

that is rooted in traditionally manual tasks into a highly

technologically enabled tax function requires a journey over

a period of time. It is not a process that happens without

thoughtful planning, nor can it happen overnight simply by

investing in the latest technology solutions in the market.

It is vital to remember that the use of technology in a tax

function needs to serve a purpose beyond merely the use of

trendy new gadgets or following the lead of others. Rather,

meaningful technology-enablement is about making strategic

changes that beneﬁt the function and the organization in

terms of time and cost savings, efﬁciency gains, and helping

to move the tax function up the value chain within the

organization, so that the tax department becomes a true

enabler of value inside the organization and beyond.

It is important to recognize that technology is but one, albeit

integral, component to tax function transformation. As the

below diagram highlights,

the operating model of a tax

function comprises six key components, with the seventh

component, performance management, as a measurement

and performance tool to monitor the value contributed to

the organization. Technology and the related components of

data and information that feed into technology solutions are

increasingly important as we move into the third decade of

the 21st century. However, technology also needs people

with skills to operate and maintain it, an organizational model

to support it, and it needs to enable or facilitate processes,

governance and risk. In short, technology may be at the

epicenter of any transformation strategy, but it must work in

unison with the other components in order to be truly effective.

Transforming the tax function through technology

Governance

and risk

Performance

management

People and

capabilities

Process and

responsibility

Source: KPMG International

Data and

information

Systems and

technology

Organizational

model

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated. © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.

Use of this publication

This publication is not intended to be suitable for all

organizations. To use an analogy to best describe the intended

audience for this publication, back in the late 1990s, plasma

screen and LED televisions ﬁrst hit the market. You may recall

seeing one for the ﬁrst time, perhaps on the wall of an upscale

restaurant, and being impressed by the clarity of the picture

and the vividness of the colors. At that time, the price of those

early plasma screen and LED televisions was high. Over the

course of the next several years, the technology became

more mainstream, prices dropped, competition entered the

market, demand increased, prices dropped yet again, and

then the price of a plasma screen or LED television became

accessible to a greater cross section of the general public.

In technological terms, the people who bought those early

expensive plasma screens and LED televisions were regarded

as ‘early adopters’; while those who waited for the price to

fall, for the technology to reach a point where it was also more

stable and reliable, typically bought when the product reached

its inﬂection point.

This publication is aimed at those organizations that prefer to

participate at the inﬂection point. While some organizations

that are early adopters may be more advanced and already

incorporating technological advancements such as artiﬁcial

intelligence and robotic process automation into their functions,

KPMG International’s ongoing surveys of tax leaders

indicate

that the vast majority of tax functions are earlier in their

transformational journeys. Many are asking why they should

change, and how they should begin. This publication seeks to

answer those fundamental questions, to help guide tax leaders

on a journey towards discovery and empowerment.

Importantly, this publication is not suggesting that more

advanced technological developments are beyond reach for

most tax departments today. Rather, this paper posits that

you must ﬁrst have a strong foundation in place to then be

able to take advantage of these more advanced technological

developments in a few years’ time, once they too have reached

their inﬂection point. Furthermore, organizations like KPMG

International and its network of member ﬁrms invest heavily

in these advanced technological developments today because

of the need to remain ‘ahead of the curve’, so as to guide

organizations through these changes when the technologies

reach their inﬂection point. With a strong foundation in place,

the possibilities of what these advanced technological

developments may deliver for tax functions is truly exciting.

As stated, the aim of this publication is to break down barriers

to transforming an in-house tax function through technology,

but to do so in a very user friendly and practical way. Throughout

this publication, we try to avoid the use of complex acronyms

or techno-jargon, but where it is necessary to use such

terminology, we provide a clear glossary of terms for you to

consult at the end for your reference.

KPMG International’s 2017 Global Tax Department Benchmarking Study Data

Transforming the tax function through technology

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Themes — Helping to

understand the problem

Of course, every organization is different and the problems

you may be trying to solve through technology will have

elements that are speciﬁc to your organization. However,

there are many recurring themes that KPMG professionals

hear when speaking with tax leaders around the world.

Consider the following examples:

“The people on our team spend a lot of

time doing manually oriented tasks to

support our tax compliance process — how

do we reduce that?”

“I’ve heard the tax authorities in my

jurisdiction are investing heavily in technology

so that they can carry out data and analytics

testing. I don’t know what they may ﬁnd with

my organization.”

“We need to spend a lot of time each

month checking, adjusting and/or

reconciling data to ensure the accuracy of

our tax returns. Even then, we are often

concerned it may not be correct.”

“The budget in my organization will not be

sufﬁcient to allow me to hire new people, or

to invest in technology to help me ﬁx some

of our existing problems.”

“Our organization has trouble obtaining the

data we need to prepare our tax ﬁlings; the

data often comes in from many different

sources. Is there a better way?”

“Our department seems to spend much of

its time trying to get the information from

the business, in managing tax problems for

transactions that have already happened;

how do we get the time to be able to prevent

problems from arising in the ﬁrst place?”

“As a tax leader, I struggle to have visibility

over the activities or transactions being

carried out by the business, or in knowing

how tax can best support our business

goals. Is there a way to help me with this?“

1 5

Transforming the tax function through technology

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated. © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.

These themes highlight the problems most organizations

encounter, and suggest why many turn to technology

solutions to help address inefﬁciencies in current systems

and/or processes, to ensure greater accuracy or insights, or to

mitigate potential risks. Knowing the problem you are trying to

solve by technology is a critical ﬁrst step in the journey. To use

an analogy, if a person wants to avoid unnecessary spending,

they may prefer to write a shopping list before entering the

store. The same is true with technology. Knowing what your

problem is before you embark on your journey helps you map

the right path to get there.

A critical framework

To help you start with your journey of discovery, let us share what we see as a

critical framework for achieving a technology enabled tax function.

Technology helps

Most tax technology solutions in the market today can be

broadly placed into one of four categories:

1. compliance

2. insights

3. process management

4. accessories, components or infrastructure, which enable

or facilitate 1, 2 or 3.

Let’s look at each of these in turn. First, however, let‘s use the

analogy of a house to explore each of these areas, and the role

they play in building a technology enabled tax function.

Compliance related solutions

Compliance related solutions refer to those solutions that

help you to prepare and/or ﬁle tax returns more efﬁciently and

accurately and/or in a more automated way. They may also

help you perform similar automation functions for invoicing

purposes. These solutions can help either with speciﬁc taxes

or with the full range of tax returns from VAT ﬁlings (including

invoicing), to corporate income tax ﬁlings, even to stamp duty.

Most tax professionals would readily accept that efﬁcient

and accurate management of compliance activities is at the

core of their responsibilities; thus, compliance solutions are

among the most common seen in use by tax departments

today.

To return to the house analogy, we might think of the

compliance related solutions as the walls and roof of a house;

they are both integral and critical to the overall structure.

Most tax professionals would readily accept that to get their

compliance handled both efﬁciently and accurately is at the

core of their responsibilities.

Insight related solutions

Insight related solutions refers to the broad category of

technology solutions that give you greater insights into the

accuracy of your tax related data, helping you to identify

potential tax risks up front and/or enabling you to identify

errors or inconsistencies in your tax ﬁlings. Examples

may include software solutions that allow you to carry out

sophisticated data analytics to identify potential errors in your

tax reporting, analyze the margins on transactions for transfer

pricing purposes, identify permanent establishment risks or

help calculate tax liabilities of expatriates employed by your

organization around the world. In terms of the house analogy,

insight related solutions may be viewed like the interior design

of a house. The interior features make the house more visually

appealing, and also more functional.

KPMG International’s 2017/2018 Global Tax Department Benchmarking Study Data

Foundation

Walls

Bricks,

concrete

Roof

Interior

design

Source: KPMG International

Transforming the tax function through technology

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Process management solutions

Process management solutions are those that help to

manage either a speciﬁc process or an end-to-end process,

by making the right information available to the right person at

the right time. More speciﬁcally, these solutions may help to

manage workﬂow within your tax function, or possibly within

your organization. They are not solutions that ‘do’ anything

in the sense that they are focused more on facilitating and

optimizing the process, rather than changing the outputs

of the process. As such, they may not provide insights into

your tax data, and they may not prepare the tax returns

you need. Rather, they help to manage these processes by

helping your organization operate more efﬁciently. Examples

include workﬂow solutions, which help to track the tax return

preparation and approvals processes, and solutions that

store your tax working papers in one place so that they are

accessible to your tax team. When we think of these solutions

in terms of building a house, we might consider these types

of solutions the concrete that holds the bricks together.

Accessories, components or infrastructure

When we speak of accessories, components or infrastructure,

we are referring to those hardware or software solutions

that are typically built into your tax technology software, or

that enable or facilitate the automation of compliance or

the delivery of insight related solutions. Examples include

solutions that manage the data extraction process, help to

deliver visualizations of your data, or those that allow you to

store data, such as cloud computing or data warehouses.

Accessories, components or infrastructure may not be the

most exciting aspects of tax technology, but they will often

be the building blocks that can make the difference between

a successful deployment and one that may not succeed. We

might think of these as the foundations of the house. A house

needs to be built on a solid foundation, with well-constructed

walls, held together with concrete and designed in a way that

is both aesthetically pleasing and functional.

A tax technology strategy needs to combine all of these

elements in harmony. Investment in one component to the

exclusion of another may not achieve the intended results.

However, you may not be able to invest in every area at once.

Transforming the tax function through technology

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Most change will be incremental

For most organizations, the incorporation of technology

solutions into your tax function will be achieved incrementally,

not radically. Rather than try to lead the way in rapid

technology investment, most tax functions will strive to

invest gradually, focusing on becoming more efﬁcient and

cost effective, and seeking to deliver more value to their

organizations, each year surpassing the last.

Again, while the early adopters may be striving more

ambitiously and experimenting and investing in research and

development early on, for most organizations, change will be

achieved through a series of steps.

Consider that when electronic payments were ﬁrst launched

through the internet, consumers often expressed concern

about the security of their data. While those concerns may still

be evident to some extent, advances in digital security have

reduced those concerns, and most consumers engage now in

electronic payments on a regular basis. In other words, what

may have seemed risky or difﬁcult 2 to 3 years ago is now a

routine task.

The challenge for the tax function will be to do things each

day or each month slightly differently from the day or month

before. Over time, your department and your organization

will adapt. Change does not happen automatically, nor does it

happen without facing some challenges along the way.

Technology goals need to be realistic

Transforming the tax function through technology

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It is critically important to be realistic about what will be

achieved in the early days with tax technology. Sometimes,

tax leaders associate automation of the tax compliance

process with the idea that, each month, they will be able to

press a single button on a computer and produce a perfect

tax return, fully correct and complete. Unfortunately, that is

the work of science ﬁction. Moreover, if it were true, then

the role of the tax manager would likely become redundant

very quickly. But there are many beneﬁts to be gained

already through early incarnations of automation, long before

total automation is a reality.

Why do we say that total tax automation is more aspirational

than real, at least in the period leading up to 2020?

While we may all wish for perfection in tax automation, it’s

important to recognize why limitations exist. For example,

perfection in tax automation would require an organization to

have perfect data in its ERP system, and for that data to be

collected and stored in a way that is deliberately set up for

the tax function; it would require the data to be complete,

with no manual reconciliations or adjustments needed.

This is simply unrealistic right now in most organizations,

especially multinational entities operating across multiple

jurisdictions. The reality is more like the following:

— Many organizations maintain data in multiple

systems — this will often require some form of

reconciliation because those systems may not always

‘speak’ to each other.

— The data that is maintained in ERP systems often

contains errors or anomalies or is incomplete,

because in many cases much of the data is still entered

manually. In the future, this may change with advances in

optical character recognition (OCR) technology, but this is

still a few years away for most organizations.

— Most ERP systems are not built with the tax function

in mind, so we cannot expect the reporting data to be

perfectly suited for the tax function’s needs.

— Compliance with tax legislation in many jurisdictions

requires adjustments to be made that fall outside

transactions that are recorded in an ERP system.

A great example of this is deemed sales transactions

whereby output VAT may be payable for goods or

services which are given away for no sales revenue

(essentially ‘free’). Similarly, an organization may make

some exempt sales for VAT purposes, or incur non-

deductible entertainment expenses, and frequently

these adjustments happen through manual intervention.

There are many circumstances requiring changes to

happen ‘outside of the system’, and these require real

people to manage the effort.

There is an increasingly important ﬁeld of expertise emerging

around data integrity, especially for the tax function. This is

the idea that while we may strive to use Big Data, ultimately

its utility very much depends upon having trust in the data

being used in preparing the tax returns — that is, that the

data is accurate, correct and complete. It is the adage that

any investment in technology is limited by the fact that the

outputs of data will only be as good as the input. Or, as the

saying goes, “garbage in will equal garbage out.”

In our experience, one possible outcome when ﬁrst starting to

invest in tax technology is to discover that the solution being

deployed does not work effectively because the underlying

data lacks integrity. This may result in the immediate project

being diverted to ﬁx the problems with data integrity — for

example, by including additional data points recorded through

an ERP system to allow better testing and analysis, or by

correcting errors in the data — referred to as ‘data cleansing’.

While this may seem frustrating at the time, it is important

to recognize that this can happen, but that the end result of

this temporary diversion in resources is a longer lasting and

higher quality series of outcomes. In other words, recognize

that you may need to take one short-term step backwards in

order to take two longer-term steps forward.

As a concrete example of this, KPMG China tax

professionals recently carried out an analysis of a client’s

ERP data. One of the client’s objectives was to identify

and reconcile the receipt of special VAT invoices as

recorded in the Golden Tax System, which is China‘s

system for taxpayers to record all transactional tax data,

with potentially available input VAT credits reﬂected in their

ERP system. However, while the team was able to carry

out the reconciliation process with reasonable accuracy,

through this process they identiﬁed a simple change needed

in the client’s data entry into their ERP system, which

would enable near real-time reconciliations to occur. The

primary outcome was a simple process change that would

better align the client’s data needs for the future, with

consequential efﬁciency beneﬁts.

The moral of this story is that the adoption of technology

as part of a tax function transformation process may not

necessarily yield the immediate results you expect, nor

should you expect it to automate your tax function fully

at the outset. There will be learnings along the way, and

the journey you are embarking upon should be seen as a

permanent feature in your organization, not as a ‘set and

forget’ short-term project.

Transforming the tax function through technology

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated. © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.

Part B —

Now let’s

begin our

journey

Starting on a journey to embrace

technology, even on an incremental

basis, is necessary to keep up, and

also maintain or even enhance the

value of the tax function to the

organization it serves.

Transforming the tax function through technology

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated. © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.

So far, we have pointed out some of the challenges within an organization that tax

technology may help you to ﬁx; we have shared a framework through which you

may consider how most tax technology solutions ﬁt; we’ve discussed the need to

consider incremental change; and we’ve acknowledged the need for realism (and

patience) on the journey to transformation.

Now we move on to some important aspects of tax technology, and given our

emphasis on keeping this simple, we’ve broken the issues down into some

fundamental building blocks. In the following sections we explore each of these

questions in turn.

Transforming the tax function through technology

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated. © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.

Why

Section one: Why transform?

In other words, why do you wish to transform your in-house

tax function to be ready to embrace technological change?

What

Section two: What should you do?

That is, what types of tax technology do you need in

your organization?

Who

Section three: Who should help you do it?

What people will you need?

How

Section four: How should you do it?

That is, how should you prioritize between different types of

technology solutions, and how should you build a business

case to do this?

Section one

Why transform?

Transforming the tax function through technology

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated. © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.

Even if you know you wish to transform your in-house tax function to be ready to embrace technological change, the

question is: why do it?

Is it because of the need to remove inefﬁciencies? Is it because of a desire to optimize tax outcomes? Is it because

your organization is susceptible to tax risks that you cannot get control of? The answer is ordinarily all of the above, but

different facets of your tax function may vary in terms of the priorities to be addressed.

In the previous section, we noted that most tax technology solutions can be placed into one of

four different buckets or categories. Now let’s give the reasons why most organizations choose to deploy them.

Types of tax technology solutions Why do it? (most common reasons)

Compliance related solutions — to remove inefﬁciencies in existing manual processes

— to ensure greater accuracy and/or transparency

of returns.

Insight related solutions —

—

to optimize tax outcomes

to obtain better insights to help manage tax risks

to create efﬁciencies.

Process management solutions —

—

for efﬁciency and accountability for decision-making

to ensure clear lines of responsibility

to share information within the organization.

Accessories, components or infrastructure —

—

to enable or facilitate compliance, insight and process

management solutions

investment is not seen as a beneﬁt in itself, but rather

a means to an end.

Even though a business may choose

to invest in tax technology because

of the beneﬁts to that organization,

what typically causes an acceleration

to any investment decision is the

news that the tax authorities are

doing likewise.

There may be speciﬁc reasons why your organization may

wish to invest in certain technology solutions that differ

from the reasons set out in the above table, so this is just a

general guide.

The additional X factor — Supercharging your

technology investment

Even when an organization believes it knows ‘why’ it wishes

to invest in technology, there is an additional X factor that

may turbocharge any such decision resulting in investment

decisions being prioritized above all else. That additional X

factor is the tax authorities.

What do we mean by this?

Put simply, the reason organizations often choose to

accelerate their investment in tax technology is because

of the threat or concern that the tax authorities may have

developed their own technology that could shine a light on an

organization’s deepest darkest secrets — to highlight its risks,

or any breakdown in controls that expose the organization to

tax liabilities.

In our experience, even though a business may choose

to invest in tax technology because of the beneﬁts to that

organization, what typically causes an acceleration to any

investment decision is the news that the tax authorities are

doing likewise.

In this regard, it is useful to spend just a few moments

exploring what the tax authorities are doing around the world

in the ﬁeld of technology solutions.

Enhanced data collection and use of technology

by tax authorities

The following summarizes some of the enhanced measures

through which many tax authorities are either getting

more data from taxpayers, or achieving higher quality data.

These are but ﬁve examples of the advanced investment

in technology and analytics we see happening in tax

departments around the world.

Five examples of how tax authorities are using technology:

Brazil

— Brazil ranks as one of the most demanding tax

jurisdictions for compliance requirements, and the

Brazilian government has been using technology to

streamline and simplify the tax ﬁling process in a number

of ways. In 2006, it implemented electronic invoicing to

digitize product transactions and in 2009, it implemented

Digital Book-Keeping System (SPED) for paperless

compliance.

— Companies are required to submit transaction invoices

to the Brazilian authority for veriﬁcation both at the time

of selling and of receiving products. SPED, implemented

in 2009, created an online book-keeping system. Digital

accounting booking (ECD) has been made mandatory,

effective May 2016. Beginning in June 2016, there was

a mandatory change from the reporting system (DIPJ)

in SPED to a new reporting system (ECF) to enable the

government’s access to more granular levels of information.

After implementation of SPED in 2009, tax collections rose

at a CAGR of 8.7 percent during 2010 to 2015, as compared

with a CAGR of 7.6 percent from 2007 to 2009.

— Brazil upgraded the government web service to calculate

the share of taxes for each of the states involved in the

transaction of selling of goods to the ﬁnal customer.

In this regard, the government has also created an

online document — the GNRE document. A recipient

acknowledgement process has been introduced in the

government web service through which companies are

required to validate their vendors’ XML.

— Brazil signed the Organisation for Economic Co-operation

and Development’s (OECD) BEPS initiative in October 2016,

and introduced Country-by-Country (CbC) reporting in Block

W of the ECF coming out of this. The Brazilian government

is promoting the use of Internet of Things (IoT) to build

digital services. It has also promoted Machine to Machine

(M2M) communication and related products by providing

tax beneﬁts to companies. However, this may not have any

direct impact on the tax landscape of the country.

— Inclusion of a ‘Block K’ requirement in SPED’s tax book-

keeping (EFD) has been made mandatory for companies

with revenues of more than BRL300 million beginning in

January 2017. Companies are required to submit inventory

and production reports on a monthly basis. e-Social, which

was made mandatory for companies with revenues of

over US$78 million in September 2016, has been made

mandatory for all companies, taking effect January 2017.

Transforming the tax function through technology

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China

— The State Administration of Taxation (SAT) launched the

“Thousand Enterprises Initiative” (TEI) in July 2015. This

program covers approximately 1,000 representative large

group enterprises from different industries. Under this

initiative the SAT collects data from the TEI-covered group

enterprises and their member entities (through local tax

authorities) for tax risk analysis. Based on the analysis, the

SAT has built risk analysis models with risk indicators for

different industries.

— Circular Shuizongfa [2014] No. 105 SAT Opinion On

Strengthening Tax Risk Management sets out key tax

risk management tasks for tax authorities. These include

tax enforcement goal setting, information collection, risk

identiﬁcation, risk ranking and risk resolution, as well as risk

management process monitoring, assessment and feedback.

— The SAT on 18 April 2017 issued SAT Announcement

[2017] No. 10 (Announcement No. 10), which provides

taxpayers with the option of being assisted (through

an automated solution) in identifying and correcting tax

calculation errors, in advance of formally submitting their

CIT annual ﬁling returns. As Announcement No. 10 makes

clear, this automated solution draws attention to potential

issues in tax calculations, non-correlation between tax

data and ﬁnancial data, and other analytical results that

might prompt a taxpayer to reconsider their original

inputs. The information on which the analysis is based is

drawn from a variety of sources, including taxpayer tax

registration, historic tax ﬁlings, ﬁnancial and accounting

data, record ﬁlings, and third party and industry data.

— SAT Announcement [2016] No. 67 on The Filing of Financial

Statements Upon Submission of Tax Returns for “1,000

Group Enterprises” And Their Member Entities was

published on 26 October 2016 and took effect from

1 December 2016. This requires TEI enterprises to ﬁle

ﬁnancial statement information with the tax authorities,

both at the time of ﬁling periodic tax returns during the

year (i.e. quarterly), and with the ﬁling of the annual tax

return (i.e. ﬁled each May following tax assessment year-

end). Financial statements (to be supplied in electronic

form) include balance sheets, income statements,

statements of equity changes, and their disclosure notes,

for every legal entity in a corporate group in China.

— SAT Announcement [2017] No. 7 on The Management

Measures on The “1,000 Group Enterprises” Catalogues

took effect from 1 May 2017. This requires TEI enterprises

to report certain entity information to the tax authorities on

an annual basis (i.e. each May), which will be maintained

on a data platform. This includes details of the taxpayer’s

in-charge tax bureaus, operating locations, industries of

activity, parent company, tax payments in prior years,

revenue in prior years and listed status.

— The Golden Tax System Phase III provides for the

centralized collection of national tax data from all

taxpayers registered with the thousands of individual tax

bureaus at all levels of government across the country.

This covers both local tax bureaus (LTBs — responsible for

local government taxes) as well as state tax bureaus

(STBs — responsible for central government taxes).

The Golden Tax System Phase III aggregates data from

all taxpayer-authority interactions, including tax and

incentive ﬁlings, tax payments, tax audits/enquiries,

records of outbound payments from China, tax invoice

issuance/certiﬁcation and information from reviews

of taxpayer internal tax controls. This is taken together

with webcrawler/public website searches on taxpayers,

industry proﬁling information used to assess tax risks,

information obtained from overseas tax authorities,

and from other domestic agencies, such as the foreign

exchange control regulator (SAFE — State Administration

of Foreign Exchange) and the commerce ministry

(MOFCOM — Ministry of Commerce). Tax ofﬁcials in

different tax bureaus across China can tap into this

system, to see prior interactions that taxpayers may have

had with tax and other governmental authorities.

— Under the forthcoming new Tax Collection and

Administration (TCA) Law, Chinese ﬁnancial intermediaries

will be required to bulk report client account transactions

(exceeding a certain minimum value) to the tax authorities

together with the relevant clients’ tax identiﬁcation

numbers (TINs) to facilitate data matching (e.g. cross-

checking of IIT ﬁlings), and risk ‘red ﬂagging’.

— SAT Announcement [2017] No. 14 on Administrative

Measures on Due Diligence Checks on Tax-related

Information of Non-residents’ Financial Accounts was

published on 9 May 2017, and took effect on 1 July 2017.

This provides the detailed rules under which China is

rolling out the OECD’s Common Reporting Standard (CRS)

for the automatic exchange of tax information. Financial

institutions with operations in China were required to

31 December 2017, and then report to the SAT tax

information on the accounts of non-residents held with

their institutions (including tax ID, balance and receipt of

different income types) by 31 May every year (starting

May 2018).

— Since 2016 the Golden Tax System has provided a powerful

platform for pooling tax data from all levels of tax bureaus

across China, covering both central government and local

taxes. Its user interfaces facilitate both taxpayer and tax

authority engagement and input, and drive standardization

of certain key data inputs. The upgraded system also

requires taxpayers to input “goods or service codes”

so that the authorities obtain standardized data on what

goods or services have been covered by the invoices. This

facilitates the tax authorities to closely monitor invoice

creation to detect ﬁctitious invoices, ensuring the integrity

of invoice information and the authenticity of ﬁling data.

Transforming the tax function through technology

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The European Union

— The European Commission has established a special

electronic and technological infrastructure and system

called Electronic Tax Management System (ETMS) for

e-ﬁling of taxes. The majority of direct and indirect taxes

are ﬁled electronically throughout the European Union

(EU). The e-ﬁling process has been further simpliﬁed

through auto-ﬁlled returns and a standard e-invoicing

format for VAT/GST returns. The EU is focused on

increasing the e-governance offering in taxation by

modernizing the tax processes and reporting framework

through use of Information and Communications

Technology (ICT).

— The EU as part of its e-governance initiative launched 20

public services in 2002 that included six offerings related

to tax. These e-tax initiatives evolved over the period

as the government established a special electronic and

technological infrastructure and system (ETMS) for e-ﬁling

of taxes. Currently, nine major taxes including direct and

indirect can be ﬁled electronically.

— The EU provides the option of pre-ﬁlled tax returns to

ease the process of ﬁling taxes. In 2014, the EU passed a

standard e-invoicing format for VAT/GST ﬁling. The EU has

implemented System of Exchange of Excise Data (SEED)

and VAT Information Exchange System (VIES) for providing

a consolidated view of tax payable across the EU. The EU

has developed an EU Standard Audit File for Tax (SAF-T) to

facilitate voluntary tax compliance and tax audits.

— Over 60 percent of the direct taxes were ﬁled electronically

in the EU in 2013 with Italy, Austria and Belgium among

leading countries. In July 2014, Electronic Identiﬁcation and

Trust Services (eIDAS) regulation was issued to simplify

the authentication process. It will enable EU citizens to

use their national eID in other EU nations when accessing

public and private services online. The mandatory mutual

recognition among EU nations would apply beginning in

mid-2018.

— In January 2015, the EU set up a Mini-One Stop Shop

(MOSS), a web portal, to simplify and automate VAT

payment by companies offering digital services to EU

nations. In December 2016, the EU proposed extending

the applicability of MOSS to online sales of tangible goods

by 2021, removal of VAT exemption for import of small

consignments and the introduction of a new One Stop

Shop system for import of goods. Taxes accounted for

around 40 percent of the EU’s GDP in 2015.

— The EU is adopting and going through digitalization

mainly aimed to ensure free ﬂow of information driven

by regulations such as AEOI, BEPS and other regulatory

requirements. The EU SAF-T was developed to ease tax

audit and Euroﬁsc, a network for exchange of information,

to control carousel fraud. In 2017, the EU developed a central

repository for storing information on advance cross-border

tax rulings and advance pricing arrangements issued by any

one member state.

— By 2020, the EU is looking to upgrade IT collaboration

tools such as Automatic Exchange of Information (AEoI)

modules to ensure transparency of information among the

EU member nations. The EU is looking to adopt blockchain

technology to improve tax compliance.

The United Kingdom

— The UK has one of the most advanced tax administrations

and the majority of direct and indirect taxes are ﬁled online

in the UK. The British government is investing around

GBP1.3 billion to move to a completely digitized platform

through its ‘Making tax digital’ initiative.

— Electronic submission of all company tax returns was

made mandatory for periods post 31 March 2010 —

implemented in April 2011. As of April 2012, VAT-registered

businesses in the UK were required to ﬁle their VAT

returns and Intrastat declarations electronically.

— Following the EU guidelines, the UK adopted the MOSS

system. All businesses supplying digital services are

required to register for MOSS. Following Brexit, the UK

government might comply with EU-wide initiatives such

as adoption of MOSS as a non-union member.

— Her Majesty’s Revenue and Customs (HMRC), the tax

authority in the UK, is planning to integrate all its internal

systems to consolidate and provide tax information

digitally. As per the ‘Making tax digital’ initiative, all

taxpayers will have secure digital tax accounts and will be

required to record and pay all their taxes online by 2020.

The new system, besides enabling taxpayers to better

manage their tax returns and ﬁle error free returns, is

believed to save HMRC around GBP6.5 billion of tax that

otherwise goes unpaid every year.

— Already, HMRC has mobile apps that help taxpayers

access their personal tax account information. HMRC

introduced voice recognition technology for its mobile app

in 2017. The government also plans to introduce a number

of technical changes to streamline and simplify aspects of

the tax rules for employee share plans.

The United States

— The US has been a catalyst of change in the tax technology

landscape, and has now reached a stage of maturity. The

developments in the ﬁeld of tax technology are micro

in nature and particularly deal with updating operating

systems or replacing legacy systems.

— The Modernized e-Filing (MeF) system is used for e-ﬁling

and ensures faster processing of returns. The Internal

Revenue Service (IRS), the governing tax authority, has

launched a mobile application providing various e-services

and also interacts with taxpayers on social media

platforms such as Twitter, Facebook and YouTube.

Transforming the tax function through technology

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— Launched in 2011 by the IRS, the IRS2Go app is a mobile

application that lets taxpayers check their refund status,

make electronic payments and receive tax preparation

assistance. In 2012, the legacy 1040 e-ﬁle program was

completely phased out and replaced by the MeF system.

MeF supports XML, which is both easily readable by

humans and machines, and also ensures faster processing

of returns.

— In 2015, 91 percent of all returns were ﬁled electronically.

As a part of its Future State Initiative, the IRS is developing

online accounts to help taxpayers manage their accounts,

ﬁlings, correspondence, payments and data, and also

identify and resolve issues digitally. The MeF system now

supports the XML format for electronic return data.

— The IRS is trying to simplify data management and

warehousing through its Customer Account Data Engine

(CADE2) program, which will merge the Individual Master

File (IMF) and Customer Account Data Engine (CADE)

databases into a single database that will house all

individual taxpayer accounts.

— The Return Review Program (RRP) is an initiative of

the IRS to replace the legacy system, Electronic Fraud

Detection System (EFDS). The project is currently in an

early phase.

— The IRS is trying to mitigate refund frauds by bringing

in a new system, the Real-Time Tax System, which will

assist in up-front quality checks on tax returns being ﬁled

with the IRS. A consolidated authentication process is

a focus of the IRS to implement a better, standardized

authentication mechanism for all forms requiring an

electronic signature. Through Assisted services, the IRS

plans to initiate more consistent taxpayer interactions,

including secure email, e-fax, enhanced online and

automated telephone services.

What may hold back investment in tax technology?

The most common reasons in our experience for

organizations to hold back their investment in tax technology

fall into one of these four categories:

1. apathy

2. fear of the unknown

3. poor data quality

4. future ﬁnance transformation.

Let’s take each of these roadblocks in turn.

Apathy is the idea that, because the organization has always

done things in a certain way, why would there be a need to

change it? It’s the old saying — ‘if it ain’t broke, don’t ﬁx it.’

The problem with this paradigm is that the world is changing,

business models are evolving and tax authorities are

enhancing their technology as we have already discussed.

In short, technology is everywhere, and it is advancing at a

very rapid pace. So to do nothing in a world of technological

advancement is in fact to fall backwards rather than to lie

stagnant. Those who do nothing risk being replaced, or

perhaps more likely, for the status and value of their tax

function in their organization to reach a state of terminal

decline. Therefore, starting on a journey to embrace

technology, even on an incremental basis, is necessary to

keep up and also maintain, or even enhance, the value of the

tax function to the organization it serves.

The other phenomenon that we see all too commonly among

tax leaders is ‘fear of the unknown’. It is the idea that by

deploying tax technology tools such as data and analytics

solutions, it will highlight errors, which may result in a loss of

face or status for those who have presided over those errors.

The problem with this type of fear is that, while it may defer

exposure or correction in the short term, in the longer term it’s

a strategy that will prove disastrous. Those same errors will

continue to accumulate, and moreover, with an ever greater

likelihood that they will be uncovered by the tax authorities

rather than by the organization itself. This is where the CFO

and other C-level executives need to take a greater role in

overseeing the governance and strategy of the tax function,

to ensure that they demand a high-performance culture and

a modern tax function. But it also requires an understanding

and acceptance that technology tools enable the tax team

to identify the proverbial ‘needle in the haystack’, which was

simply not possible before.

So the culture and environment in which tax technology is

deployed needs to recognize the value in shining a light on an

organization’s previously unseen problems. This will help get

them under control, prevent their recurrence, and align reward

and recognition with the detection and prevention of risks

rather than being associated with the identiﬁcation of past

liabilities. Moving to this type of culture produces long-lasting

beneﬁts.

Another common excuse often heard is that ‘tax technology

solutions will not be beneﬁcial to our organization

because the quality of our data is poor.’ And so it shall

remain if this mantra is accepted! Here is where the

deployment of tax technology solutions may produce

beneﬁts in two stages — the ﬁrst stage being the

identiﬁcation of data improvements that need to be made,

and the second stage being the greater insights obtained

from those data improvements.

Transforming the tax function through technology

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And ﬁnally, an oft-cited reason for deferring investment in tax

technology is that ‘we are rolling out a new ERP system

in X years’ time.’ While future changes in ERP systems may

reasonably defer major tax technology investment decisions,

typically this is put forward as an excuse for apathy. For

example, if the organization is really rolling out a new ERP

system in the future, then where is the strategy for how tax

technology will be deployed upon its arrival? And what is

the tax function doing to ensure that the new ERP system

delivers them the data they will need? The simple point here

is that there is much that can and should be done in readiness

for such a new ERP system — this should drive greater

change, not lessen it.

So, in short, the evidence clearly shows that organizations

need to consider turbocharging their investment in technology

if they perceive they may be exposed, either through errors

or heightened tax risks, or even where there is a lack of

transparency over their data, or controls over their tax

processes. Tax authorities now have an exponentially greater

prospect of ﬁnding them, even if you don’t. Furthermore,

many of the reasons put forward for not deploying tax

technology solutions merely represent excuses for apathy,

which potentially creates greater problems later.

Returning to the question of ‘why’ you would invest in tax

technology — the answer is for all of the reasons set out

above. However, in today’s environment, there is an added

pressure in place in many jurisdictions: namely, the prospect

of the tax authorities being able to shine a light in the deepest

darkest crevices of your organization’s data and tax reporting.

Would you prefer to be in control of ﬁnding it and ﬁxing it, or

would you prefer others to do it for you?

Transforming the tax function through technology

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Section two

What should you do?

Transforming the tax function through technology

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Once you know the answer as to ‘why’ you would choose to embrace technological change in your in-house tax function,

you then need to consider ‘what’ you will do. To help answer this question, we have returned to our four ‘buckets’ or

categories of tax technology solutions, and our aim here is to provide you with insights into some of the tax technology

solutions that are available, and aspects we see as being ‘core’ to your business needs, or ‘optional’ depending on your

speciﬁc organizational risks, efﬁciencies or business activities.

Category one — Automating the tax compliance process

The main purposes of tax compliance solutions are to improve

efﬁciency in generating tax returns as well as the accuracy of

those returns.

These kinds of solutions leverage data that has already been

collected as part of the core business processes carried out

by the ﬁnance function, namely procure-to-pay, order-to-cash

and record-to-report (general ledger accounting). In those

processes a variety of data is captured in the ERP system.

Let’s take the example of the order-to-cash process.

Salespeople initiate sales orders for the sale of products or

services. Information about the nature of these transactions

(goods or services) and critical location information such as

‘ship-to’ and ‘ship-from’ countries is captured as part of this

process.

ERP systems support these processes and help to

automatically calculate (indirect) taxes as well as reporting

revenue for CIT purposes on an accruals basis, based on

the business characteristics of the transaction. In the case

of automated tax determination software, these decisions

are made based on what information is captured — for

example, the product code or service code may determine

the applicable VAT rate, or whether the sale is to be exempted

or zero rated. In the case of manual tax decisions, these

decisions are based on the level of tax expertise of the users

that capture these transactions.

Now, getting back to the tax compliance process itself. In

order to generate a tax return, the outcomes of the key

business processes relevant for tax are used to map these

tax outcomes to the relevant sections/boxes in a tax return.

As such, the key features of any tax compliance technology

solutions are to: (1) collect the relevant tax information from

the various data sources in an organization; and (2) make sure

that this information is automatically mapped to the tax return.

The core intelligence of these solutions sits in the

underlying logic that bridges relevant tax data with tax

return requirements. Furthermore, by deploying appropriate

infrastructure or technology components, additional beneﬁts

beyond merely automation may be created by means of

visualization (to enhance user experience and oversight),

central data storage and even workﬂow. But we’ll discuss this

later as part of Category four, below.

As mentioned earlier in this publication, it is highly unlikely

that tax returns will be generated straight from ERP data, at

least for the foreseeable future. This is because of two main

factors: (1) the way the data in an ERP system is entered will

need to be ‘sliced and diced’ differently from the way it needs

to be presented for tax return purposes; and (2) because

ERP data is not the sole source of information for tax return

purposes — other sources and indeed manual interventions

may be needed.

By way of example, in many jurisdictions data such as

from customs or from manually prepared spreadsheets,

which record various adjustments, is needed for VAT return

preparation, and for reporting such as Country-by-Country

(CbC) reports, employee or human resources related data

may be needed. As such, the role of tax compliance solutions

is to serve as a channel or funnel to bring together these

different data sources, to ‘slice and dice’ the data to prepare

it for tax reporting purposes, and to serve as a prompt for any

necessary manual adjustment processes.

Another key aspect of high quality tax compliance solutions

is the functionality to run ‘trend analysis’, by comparing key

indicators of the current return against previous periods. If the

total throughput VAT (i.e. the sum of VAT output

and VAT inputs) in the current period is signiﬁcantly higher

(>20 percent) than for the previous period or signiﬁcantly

greater than for the comparable period 12 months ago

(for seasonal businesses), this might be an indication that

something is wrong in the source data or some unusual

transactions have taken place. Similarly, an organization will

want to monitor its effective tax rates for CIT purposes, or

its proportion of entertainment expenses, to ensure it is

properly capturing this information given the propensity of tax

authorities to monitor non-compliance.

The core intelligence of tax

compliance solutions sits in the

underlying logic that bridges

relevant tax data with tax return

requirements.

Transforming the tax function through technology

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A concrete example of a tax compliance solution

is KPMG’s technology enabled compliance

solution for tax. This solution is a KPMG in-house

developed software solution for VAT and corporate

income tax compliance purposes. This solution has

all the components described above, generating

returns in four simple steps: (1) data upload, (2) data

consistency checks, (3) manual adjustments and

(4) return preparation. As part of the fourth step

(return preparation), the KPMG solution has trend

analysis functionality with key indicators that

can be used to identify potential errors, risks or

anomalies. And, as noted earlier, tax authorities

are already deploying similar tools, some of which

allow taxpayers to voluntarily check for errors in their

returns through the use of automated tools.

Finally, on the topic of tax compliance solutions,

as noted previously it is not simply the ability to

produce the ﬁnal return, which is the end of the

process. Consider the other features of KPMG’s

Technology Enabled Compliance Solution for Tax

that highlight the need not only to consider the end

product, but also the means to that end, as well as

the other interdependencies with other categories

of the solution:

Key features of KPMG’s tax

compliance solution

— Automated VAT and Corporate Income Tax returns

ready to ﬁle, together with local tax and surcharge

calculations.

— Flexibility to be provided as either an outsourced

service, where returns are prepared by KPMG, or for

your in-house use.

— Trend analysis, which allows you to highlight

potential risks, errors or anomalies, before you ﬁle

the return.

— Visibility over the current status of each return

and relevant due dates, with control and approval

functionality.

— Data storage ﬂexibility utilizing either the cloud or

within your secure environment.

— Uploading of invoices validated through the ﬁling

systems of your local jurisdictions.

— Specialist VAT compliance modules for complex

taxpaying industries such as trusts or funds.

— Dedicated telephone contacts to provide user

support for your compliance needs.

Category two — Solutions that provide greater insights

The second category of solutions are those that typically aim

to show you data, information or outcomes that you need to

know but may not have been able to see before. The main

idea here is to transform data into insights, which can then

deliver value to your organization.

In the data driven world in which we now live, these solutions

have the greatest potential for growth over the coming

years. Consider the operation of Moore’s Law,

which is

the observation that the number of transistors in a dense

integrated circuit doubles approximately every 2 years — a

theorem that is now routinely applied to data, too. It then

follows that the growth of data, and therefore the need to be

able to analyze it and identify trends or insights from it, will also

grow. It is truly amazing how much information and value may

be concealed in your data, which can be unlocked if you deploy

data and analytics solutions.

Solutions providing insights into data typically have three main

aspects to them:

1. data extraction — that is, where the data comes from

and how it gets into the solution

2. data transformation (or cubing) — which we

colloquially call ‘slicing and dicing’, or more accurately,

where the data points are transformed, dissected,

amalgamated or cleansed

3. data visualization — this is what the user (you) sees and

is able to generate insights from.

Whereas 1 and 3 are mainly components, though very critical,

the core intelligence of insights (D&A) solutions is in the data

cubing area. This is where the data is transformed into value.

Data Analytics Visualization

Data extraction Data cubing Actionable insights

Aspect one — data extraction

An important component of a data insights solution is the

availability of sophisticated technologies to facilitate the

data extraction process. Data extraction is referred to as

the process of pulling or obtaining relevant tables and ﬁelds

from ERP systems, tax authority systems or customs. As

data volumes nowadays are incredibly large, data extraction

technologies are essential. The ‘old days’ of obtaining data

through requesting and delivering Excel spreadsheets is well

and truly over. If data extraction does not work or takes too

much time for the organization’s IT department to prepare,

insights solutions simply cannot be successfully deployed.

In other words, data extraction is the foundational component

upon which all insights solutions are built. Absent the data,

absent the insights!

Effective data extraction needs to be able to work with

multiple ERP systems, and for multinational organizations,

this process can be complicated further by the fact that there

is much greater variety in the types of ERP systems used

across jurisdictions. For example, across much of Europe

and the US, multinational companies will typically use well-

known ERP systems such as SAP, Oracle, JD Edwards and

similar. Data extraction from these systems will often be pre-

conﬁgured so that the tax insights solutions can map the data

ﬁelds from these well-known ERP systems to the tax insights

solution. However, the same company may operate in China

using other ERP systems such as Kingdee, Inspur, Aisino

and other local Chinese systems. This means there is a need

for data extraction to be able to work with virtually any ERP

system when it comes to the needs of most multinational

organizations.

Merriam-Webster, https://www.merriam-webster.com/dictionary/Moore’s%20law

Transforming the tax function through technology

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Aspect two — data transformation (or cubing)

The data transformation or cubing part is where the various

data points are connected to each other to build a so-called

‘tax data warehouse model’, which is a model that brings all

tax related data together with the right granularity and a lot of

calculated ﬁelds that contain critical information, to drive the

tax insights solution. As mentioned, this is where the data

is transformed, dissected, amalgamated or cleansed. Let’s

explain what we mean by this.

If you consider a common ERP system may have 50 different

data points for every transaction, such as the date the

order was placed, the price for the goods or services, the

number, quantity or extent of goods or services being sold

or purchased, the general ledger account number, details of

the seller or buyer, the delivery date, the ‘ship from’ country,

the ‘ship to’ country, and the list goes on. Some of these data

points may be relevant for tax purposes for certain insights,

but many will not be relevant — so the ﬁrst objective of data

cubing may be to exclude those irrelevant data points for each

of the insights to be delivered. The second objective may be

to aggregate or disaggregate certain data points, or to match

different data points from each transaction. Think of it like a

very complex series of Excel spreadsheet formulas.

Aspect three — data visualization process

This is the end result or product of any insights-based

solution, and it is what the user experiences. Ease of use of

any tax insights solution is critical. The tax insights solution

needs to be logical, and for the most effective solutions, they

are often the result of many hours of user acceptance testing,

feedback and improvements. It is often said that what makes

Apple products so successful in the market is that they are

so intuitive, as evidenced by the number of 4- and 5-year-old

children able to operate products such as iPads and iPhones.

Just as these products are intuitive to the user, effective tax

technology solutions must be visually appealing, attractive

and enticing to the user, and above all else, produce insights

the user can readily see and interpret.

But it is equally important to remember that data visualization

must go hand in hand with proper data extraction and data

cubing. For example, we recall seeing for the ﬁrst time the

demonstration of a new tax technology solution developed by a

third party software provider — it looked visually very appealing.

However, what differentiated those clients without much

technology experience from those with it, is that the former

group focused on the ‘wow’ factor, whereas the latter group

focused their questions on the following:

— what data sources did you use in this solution?

— what types of ERP systems can the data be extracted from?

— how is the data cubed?

— what types of analytics tests can be conducted?

It was only after these questions had been asked that it became

clear that the software provider had built what was akin to a

brand new car, but without building the engine. In short, what

they were showing was a fancy presentation but without the

underlying extraction and cubing having been built.

So in short, tax insights solutions will only grow in importance

to an organization’s tax function as data expands at an

incredible pace, as the demands of tax authorities increasingly

shift to real-time reporting and as the multitude of different

reporting obligations continues to expand. But, as a buyer or

user of these tax insights solutions, the focus needs to be on

not just the ease of visualizing insights associated with these

solutions, but also their data extraction and cubing capacities.

If you take a look at a typical end-to-end tax process, tax

insights solutions will provide insight into the quality and

efﬁciency of the various steps in the process before the

compliance process starts. Typical examples of areas where

insights solutions can be of beneﬁt include:

— highlighting the accuracy of indirect tax calculations

— calculating actual gross and net margins on

intercompany transactions

— providing an overview of actual supply chains based on

real transactions

— determining business scenarios that are not reported

for tax purposes (but should have been reported)

— managing tax residency risks through the tracking of

employee time in various countries

— identifying anomalies in HS codes used for goods

importations for customs purposes

— ﬁnding indirect tax savings opportunities due to the use

of wrong tax codes.

Transforming the tax function through technology

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An example of a typical insights solution is KPMG’s

Tax Intelligence Solution (TIS).

TIS is KPMG’s global data and analytics solution for

tax purposes.

At present, KPMG has developed speciﬁc modules of

TIS for VAT, Customs, Transfer Pricing and (soon) for

Direct Tax.

Key features of KPMG’s Tax Intelligence Solution (TIS)

Tax Intelligence

Solution

Transfer

Pricing

Indirect

Tax

(VAT/GST)

Customs

and Trade

Direct

Tax

Transforming the tax function through technology

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General features

— Built with data security in mind, as the data never

leaves the organization’s premises.

— Availability of industry-leading data extraction tools,

which minimizes the burden on an organization’s IT

departments when collecting the data.

— TIS has been developed using a ‘common data

model’, meaning that it works for most ERP

systems.

— User friendly data visualization and reporting

tools to allow easy manipulation and reﬁnement

of outputs.

TIS VAT features

— 50+ available VAT exception reports.

— Visibility over VAT throughput, including whether

VAT is overpaid and/or where VAT credits have been

under-claimed.

— Oversight to reconcile invoices recorded in your

ERP system and those sent or validated by the local

tax authorities.

— Oversight over input VAT transferred out as a result

of exempt sales or non-creditable purchases.

— Insights into whether organizations comply with

provisions for accounting for VAT on free gifts and

other beneﬁts.

TIS Transfer Pricing features

— Provides valuable insights into the global supply

chain, by analyzing sales and intercompany

transactions.

— BEPS13 module enabling data collection for Master

File/Local File drafting, as well as for Country-by-

Country reporting.

— Operational Margin Analysis: Calculation of gross

margin and net margin by legal entity, product group

and SKU level.

— Standard exception reports to test for anomalies in

net and gross margin calculations.

TIS Customs features

— Identiﬁcation of irregularities and inconsistencies in

the data reported to customs authorities.

— Insight in supply chain savings opportunities as well

as opportunities for process improvements.

— Ability to highlight different areas (valuation,

classiﬁcation or country of origin) that may have

led to overpayments of customs duty and value-

added taxes.

— The ability to analyze trade and customs data on

free trade agreements available based on speciﬁc

trade lanes and identify untapped trade agreement

beneﬁts.

— Data visualization and reporting to allow easy

manipulation and reﬁnement of relevant trade data

topics (e.g. tariff classiﬁcation, country of origin,

entry type, incoterm, etc.).

Effective tax technology solutions must be visually

appealing, attractive and enticing to the user, and

above all else, produce insights the user can readily

see and interpret.

Category three — Process management solutions

The third category of solutions is usually referred to as

‘workﬂow’ solutions since the main purpose of these

solutions is to create better controls, governance or

efﬁciencies over the completion of work tasks, usually by

‘enforcing’ a process.

During a process a lot of information may be captured and

processed by a number of different people. Furthermore, there

may be a lot of dependencies between various steps in an end-

to-end process. By way of example, the completion of a single

tax return may require data to be input by three or four different

people within an organization; the tax return may be prepared

by one person, reviewed by a second person and ultimately

approved by a third person.

In order to facilitate this process, technology solutions may

be used. These solutions have modelling capabilities in order

to bring in the relevant company-speciﬁc process steps,

documentation requirements and activity dependencies.

In modern tax functions, process management solutions are

being used for:

— handling of research and development (R&D) claims

(see case study on page 29)

— preparation of VAT and CIT returns (as a component of

any tax compliance solution)

— Transfer Pricing documentation preparation

— tax invoice handling

— Global Mobility process tracking.

In general for all these kinds of processes, process

management solutions help to improve the efﬁciency and

transparency of the entire process. They make sure that

information is available on a timely basis and to the right

people. The time taken to complete the process may also be

reduced because the waiting time due to missing information

may be minimized and miscommunication in terms of roles

and responsibilities is also clariﬁed.

Workﬂow management solutions also serve to better control

risks associated with various tax processes. For example, the

policy of an organization may be that issuing a special VAT

invoice higher than a certain amount requires approval from

a certain tax manager before issuing it to the customer — a

workﬂow management solution can be used to force these

kinds of approval steps.

Similarly, company processes that were historically

documented and deﬁned using manuals gathering dust on the

shelves can now be embedded into workﬂow management

solutions, to ensure clear lines of accountability. An excellent

example of this is for companies deploying the RACI

framework — this is the framework through which key tax

risks or decisions should be assigned based on who is to be

‘responsible’, ‘accountable’, ‘consulted’ or ‘informed’. Now

these frameworks can be built into workﬂow management

solutions. User access, approvals or tasks may be assigned

to a variety of different users with different proﬁles (roles and

responsibilities).

In practice, we very often see process management solutions

combined with compliance or insights solutions, rather than

being implemented as stand-alone solutions. In other words,

they may be a feature of either Category one or Category

two solutions.

Process management solutions make

sure that information is available on a

timely basis and to the right people.

Transforming the tax function through technology

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Category four — Accessories, components and infrastructure

The last category of tax technology solutions, previously

referred to in this article as akin to the foundation of a house,

are key enablers for all tax technologies. The solutions in

categories one to three simply cannot run without having a

proper infrastructure in place to host the technology or to be

the visualization towards the end-user via a user interface.

A key characteristic of any accessories, components or

infrastructure is that they are not tax-speciﬁc in the same way

as the core tax intelligence (compliance, insights or process

solutions) referred to in categories one to three. Other non-tax

technologies used in the business may be able to leverage the

same underlying infrastructure, accessories or components.

To use an Apple iPhone analogy, the platform is the iOS that

enables all apps (our categories one to three) to run smoothly

and leverage the usage of shared components (storage,

visualization libraries, etc.)

So in fact this category isn’t a solution in itself but rather a part

of all the other three categories of tax technology solutions,

however equally important.

Usually this category contains existing software applications

developed by third party providers, programming language

work benches or cloud environments. Let’s discuss some

speciﬁc examples of what types of software are contained in

this category.

Take the example of a powerful tax insights solution, which

needs a good visualization front-end in order to make it

easy for the end-user to see vast quantities of data, or to

identify patterns from that data. Industry-leading Business

Intelligence (BI) software providers like Qlik, Tableau or

Microsoft have developed applications (QlikView, QlikSense,

Tableau or Power BI) that can be used in any tax technology

solution. The beneﬁts and importance have already been

outlined in the tax insights solution category.

Similarly any tax technology solution that uses data also

needs to deal with the process of receiving data and making

sure it is loaded into the right format for the solution. The

process of moving from obtaining data, transforming it into

a structured format and then loading it into a database is

usually referred to as Extraction, Transform and Load (ETL).

The ETL process is a very technical process, but critical in

the sense that if it isn’t done properly, the data engine that

contains cubing procedures simply does not work. Once the

ETL process has been set up, usually starting with a one-off

deﬁnition of the various process steps, it can then be set up

as a repetitive process. This is also an interesting area for the

application of Robotics Process Automation (RPA), which is

discussed later in Part C of this publication. There are various

third party software solutions available to support the ETL

process. The most well-known software applications are

Informatica PowerCenter, SAS Data Integration Studio and

Oracle Data Integrator.

A third example is related to infrastructure: hosting and

storage. Any tax technology solution provided on a cloud/

online basis needs to use hosting and storage services.

Hosting is effectively an online environment where programs

can run. Storage refers to the amount of space that is available

in that online environment to store data. Users of technology

solutions usually only notice hosting and storage servers

when they are not working; for example, when the server is

down and they cannot access their programs and data. Or

when there is not enough storage to capture data — i.e. the

disk is full.

Therefore, an important quality criteria for third party

providers of hosting and storage services is to provide an

environment that is accessible anytime, anywhere and with

virtually no down-time. Furthermore they should provide

sufﬁcient ﬂexibility to scale up or scale down in terms of data

storage, processing power, etc., in case there are unexpected

increases in data volumes that need to be processed. This

is indeed one of the key beneﬁts of using cloud services,

because most customers pay cloud providers based on an

actual cloud ‘usage’ basis, rather than on a ﬁxed license basis.

Some major cloud-service providers on a global scale are

Microsoft (Azure), Amazon (Web Services) and Alibaba (Cloud).

Although these examples don’t seem to have a lot in common

at ﬁrst sight, the real beneﬁts to support tax technology

solutions will arise when you start combining and packaging

them into a platform concept. The term ‘platform’ is, in our

view, an often over-used or mis-used term because people

associate the success of many e-commerce giants with

having an effective ‘platform’ and therefore others have

often tried to mimic this by describing particular solutions as

comprising a platform.

A ‘platform’ is simply the package of solutions, applications or

components that all come together effectively for the beneﬁt

of its users. The platform may have standard components

that may be relevant for each ‘application’, such as data

visualization, ETL, storage, workﬂow, etc.

Transforming the tax function through technology

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An important quality criteria for third party providers

of hosting and storage services is to provide an

environment that is accessible anytime, anywhere

and with virtually no down-time.

The combination of these is what creates a common

platform on which various solutions (or apps) can then run.

With a common platform a lot of beneﬁts can be realized:

— uniformity of user experience: all applications have the

same look and feel

— rapid development and/or deployment of new

applications: components may only need to be set up

once and can be leveraged across new applications

— centralization of data storage: data can be used for

multiple purposes across different applications

— centralization of user management: users can access

applications via a single login and access is granted based

on a ‘need to know, need to have’ basis.

So what we have learned is that the accessories, components

or infrastructure may not be speciﬁc to the tax function,

but rather they typically leverage these within the broader

organization. Their signiﬁcance is akin to the foundations of a

house — they are integral to the success of deploying any tax

technology solution.

In the below ﬁgure we have outlined a typical client end-to-

end tax process and mapped each of our four described types

of tax technology solutions in order to illustrate where in the

process the typical beneﬁts are created.

Master

data

Business

transactions

Transactional tax

calculations

Tax

returns

The end-to-end tax process

Process management solutions

Infrastructure (storage/hosting, etc.)

Platform (shared components/accessories)

Insight solutions

ETL Workﬂow Visualization

Compliance solutions

Transforming the tax function through technology

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The McKinsey Global Institute, for instance,

estimates that only 5 percent of occupations

will be able to be fully automised by 2065.

But it reckons that about half of the activities

within occupations will be automatable. So,

95 percent of occupations will remain but the

work within will change. Over the next half-

century. You can see why this study didn’t get

as much publicity as the apocalyptic ones —

jobs will change over the next 50 years, nothing

too shocking, not many hurt.

But the most important counter to the panic

is the evidence of the past three centuries.

As each wave of technological change has hit,

from the agricultural revolution to the industrial

to the digital, many job categories have indeed

been wiped out. But many more have been

created. So that there has been a net gain

every time. The simple fact is that we can

always see jobs disappearing but we can never

imagine the jobs that will arise in their place.

The same journalist portrayed the future as follows:

Section three

Who should help you

do it?

‘How to ensure Australia thrives when the robots come,’ Peter Hartcher, Sydney Morning Herald, 30 September 2017, smh.com.au/comment/how-to-ensure-

australiathrives-when-the-robots-come-20170929-gyrgr9.html

‘How to ensure Australia thrives when the robots come,’ Peter Hartcher, Sydney Morning Herald, 30 September 2017, smh.com.au/comment/how-to-ensure-

australiathrives-when-the-robots-come-20170929-gyrgr9.html

Transforming the tax function through technology

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The short answer, if you spend too much time reading sensationalist media reports, is that you don’t need people,

instead you just need robots. You can happily make your staff redundant and replace them with robots — machines

that don’t take coffee breaks, don’t need to get paid overtime, and don’t take sick leave or require annual leave — the

perfect employee!

Thankfully the above paragraph is nothing more than a work

of ﬁction.

An Australian journalist recently pulled apart some of the

sensationalist reporting that had suggested that 40 percent of

jobs would be automated within the next 10 to 15 years. The

journalist referred to more reasoned studies by organizations

such as the McKinsey Global Institute, which suggest

something much more balanced:

The signiﬁcance of these quotes is twofold. First, the vast

majority of jobs will not disappear, and will not be replaced

by robots, at least over the next 50 years. Rather, the nature

of the tasks and responsibilities in most jobs will change.

Second, while some jobs may disappear (and obviously there

is not a consistent view from the experts on the percentage

affected), new jobs will emerge in their place. In other words,

it’s an evolution, not a revolution!

So the true answer to the question — what people will I

need to help me do that? By and large, you will still need your

current people. However, the nature of their roles will need to

change, and you need to start them on that transformational

journey now, albeit by taking incremental steps.

Let’s consider how best to do that. Set out below we provide a framework of the skillsets you will

need within a technology powered tax function:

Enablers of technology

These will typically be people with IT capabilities,

able to evaluate and deploy technology, train users

and carry out day-to-day troubleshooting.

Transforming the tax function through technology

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Users of tax

technology

These will typically be the

people in your tax team,

whether they are in advisory,

compliance or planning.

Data and

analytics experts

These will be people who can

identify tax technology needs

in your organization, or process

improvements and efﬁciencies.

Critical to the success of a tax technology enabled

tax function is that you will need IT people to

develop some tax skills and tax people to develop

some IT skills.

The very simple proposition is to recognize that if your tax

function uses technology to carry out much of its work,

then you will need people within your organization with tax

skills and IT skills. However, critical to the success of your

technology enabled tax function is that these skillsets need

to meet in the middle — in other words, you will need your

IT people to develop some tax skills, and your tax people to

develop some IT skills. Let’s explore this a little further.

Starting with your IT people: they may currently sit within

your IT function, and your role is to provide them with only

a high-level of information about your tax systems and

processes. They need just enough knowledge to be able to

help you to ‘ﬁx’ the problems you encounter. Spend some

time with them so that they know what you do, and how you

do it. They don’t need to understand tax technical issues —

rather, they need you to walk through things like the

compliance process — show them how you progress from

the data in your systems to the completion of tax ﬁlings. Also

show them the problems you are currently experiencing —

say, for example, you don’t receive the data in the format you

need it, or you don’t have visibility over certain data.

Importantly, for those with IT-related skills, as mentioned

you can typically access these people within your existing

IT function. However, it may be important that you get a

speciﬁc allocation of those people. Put simply, you do not

want a situation where you are calling a virtual help line every

time there is a problem and encountering someone different

without any background knowledge in the technology solution.

Otherwise, they won’t be able to meet you in the middle.

You want them to develop an afﬁnity for your business; you

want them to develop experience so that they get to see the

same issues over and over and learn from them; you want

them to have formed working relationships with you, so that

they are accountable to, and feel invested in, the outcomes

from your tax function. And if you don’t have these people

available to you within your organization already, then you

will either need to hire them, or you need to ensure that

full and consistent access is provided to you as part of any

outsourcing arrangement. In other words, if your organization

will not allow you to invest in IT expertise in-house, consider

whether you can access that expertise under an arrangement

with your technology provider.

For the tax people in your organization, you need them to

develop some IT-related expertise. This does not mean they

need to learn how to program, nor do they need to become

IT experts. Rather, you want your tax team to possess skills

in areas such as data and analytics — that is, the ability to

identify anomalies or discrepancies in data, or to see patterns

in data. They may need to be able to see how solutions can be

built through computer programming, though they need not

have the skills to do the programming themselves. They need

to understand the processes within your organization —

for example, how to get from data entry through to the

completion of a tax return. These people will often have

a background in areas such as mathematics, science or

computer science. Even consider people who write Excel

spreadsheets at the moment and are adept at thinking of tax

problems in terms of formulas, or tax compliance in terms of a

series of processes.

To use a football or soccer analogy, the whole aim of this

exercise is to develop people who can ‘kick with both feet’,

meaning they can speak intelligently or proﬁciently to both tax

and IT matters, while not necessarily being an expert in both.

Think of these people as akin to translators — they need to be

able to speak the language of tax and of IT well enough that

they can build a bridge in communication between your tax and

IT teams.

The most important aspect to recognize is that this is a skill

that can be learned, rather than necessarily acquired. A tax

person who is adept with numbers and at problem solving

can develop the IT capability by working hand-in-hand with

their IT counterparts, and in generally taking an active interest

in technology developments, and what the market needs.

Likewise, an IT person who invests sufﬁcient time understanding

your tax function, being co-located with your team, and learning

the processes and systems you use will quickly develop the

capability to serve as the ‘bridge’ for your organization.

Critically, the tax technology solutions your organization is either

acquiring or developing serve to ‘enable’ the tax function —

they do not serve to ‘replace’ decision-making within the tax

function. This means, for example, that workﬂow solutions

should serve to facilitate processes within your organization,

but in each step of the process, it may not necessarily act as

a substitute for your tax knowledge or ability. Oftentimes we

see tax people becoming bogged down in trying to design

processes to deal with the 1 percent of situations, whereas a

process that automates the other 99 percent of situations with

the ability to override for the 1 percent, would sufﬁce.

Transforming the tax function through technology

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Let’s take a simple case study to illustrate how this comes to life.

An IT person who

invests sufﬁcient

time understanding

your tax function,

being co-located

with your team,

and learning the

processes and

systems you use

will quickly develop

the capability

to serve as the

‘bridge’ for your

organization.

Transforming the tax function through technology

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated. © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.

Case study

An R&D claims process

Assume your organization currently makes claims for various tax concessions

applicable to research and development expenditure in one of your operating

countries. Those R&D claims are currently prepared and lodged by a member

of your tax team. That tax team member complains, on a regular basis, that the

challenge they have in preparing the R&D claims is in accessing the data that

helps to quantify the eligible R&D expenditure. That is because the expenditure

is not coded into your ERP system each month as ‘R&D expenditure’. Instead,

it may be buried among employee labor costs, in speciﬁc equipment or parts

purchases, or in hiring third parties to provide expert support. Let’s assume

that your staff member who prepares the R&D claims also complains that

he or she has difﬁculty assessing whether the R&D your company carries

out sufﬁciently contributes new knowledge, or whether it makes substantial

improvements in technologies, in products or processes.

The ‘old’ way of doing this would be for your tax team member to regularly

engage in discussions with those staff who are principally responsible for

the development of the R&D and, through a process of discussions and

consultations, to then work backwards and search expenditure records

to try to reconstruct what was actually done. The outcome was usually an

underclaiming of R&D expenditures because the eligible expenditure records

were not readily identiﬁable.

A tax person with some IT capability may see this as an opportunity for

improvement — an example of where a technology solution could be used to

solve the time intensive and frequently inaccurate problems of the past. So

the tax team member sits down with your IT team and the engineers in your

organization (because they usually carry out the R&D) and they each start by

asking the engineers to outline the processes they follow.

From this process, the tax and IT team will start to get a clear picture of

the end-to-end process from the decision-making surrounding potential

exploration of R&D, right through to its realization (whether successful or

not). The whole secret in bringing everyone together is to see the process

as leaving a series of ‘data points’ or digital footprints. For example, if the

engineers are required to follow some sort of process in which investment

in R&D is considered, approved, developed, tested and then brought to an

outcome, each step of that process will ordinarily leave some form (or more

likely multiple forms) of digital footprint. You now have the components

necessary to apply a technology solution.

The tax and IT team can then explore the tax technology solutions that may be

available in the market to assist companies in managing their R&D claims. And

in doing so, they will be looking to deploy a technology solution that leverages

those ‘digital footprints’.

Section four

How should you do it?

Transforming the tax function through technology

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In the previous sections of this publication we have considered why you should develop your tax technology capabilities,

what you should do to develop a technology centered tax function and who should help you do it. The last question is:

how should you do it?

In our experience, even where the tax managers in an

organization may want to implement a technology centered

tax function, they still need to overcome one of the biggest

inhibitors to any change, and that is the need to have a valid

business case to support any investment decision.

In this section of our publication, we examine some of the key

aspects to building a successful business case for change.

And the process for building any business case for change is

really no different from any normal budgetary process. The

numbers need to add up.

Consider the following two examples:

The tax leader at Organization A learns about a new tax

technology solution being provided by a third party software

provider. He examines the costs and submits a request to buy

the technology solution at a total cost of US$1 million. The tax

leader says it will make his job more efﬁcient and will help him

in preparing tax compliance returns. The tax leader puts this

proposition to the CFO but is rejected.

Now consider the position of a tax leader at Organization B,

who learns about the same tax technology solution. He

examines the costs in some detail, understands the different

‘purchase’ options available — from an outright purchase, to

a periodic license, to full outsourcing of the tax compliance

process. He concludes from his assessment that a 3-year

license period most likely represents the effective life of the

solution. He assesses the extent of man hours that the solution

will save and the consequential ﬂow on impact to costs. He

then approaches the CFO with a proposition around deploying

the tax technology solution in exchange for a reduction in

headcount in the compliance function (to be achieved through

natural attrition). The outcome of the proposition is a net cost

saving, and this is even before factoring in the beneﬁts of

greater accuracy. To help to manage any unexpected problems

or risks in deploying the solution, the tax leader also negotiates

an obligation-free trial period for deploying the tax technology

solution. Not surprisingly, the CFO accepts the proposition.

Please see an example business case to deploy a tax data

insights solution in the breakout box.

Case study

Example business case to

deploy a data insights solution

An organization wants to implement a data insights solution to identify

opportunities and risks sitting in the indirect tax (VAT) process in four countries.

The strategy is to build in-house capabilities to work with a data insights

solution from an end-user perspective. From a development perspective they

are looking to existing solutions and preferably deploy them on an on-premises

basis in order to manage IT data security risks.

The tax manager has decided to run a ‘proof-of-concept’ (PoC) with a tax

D&A solution, delivered by an external tax technology service provider, with a

relatively small fee (US$15,900).

By analyzing a 6-month period of transactions for only one country, they found

an amount worth US$28,700 of unclaimed VAT. Furthermore, the PoC showed

invoices that were not reported in the VAT return because the ERP system did

not ﬂag them as relevant for VAT. This has potentially led to an underpayment

of VAT, which might result in the imposition of penalties and ﬁnes from the tax

authorities if the organization is subject to audit or review by the tax authorities.

Based on the PoC results, the tax manager has presented the high-level business

case to the CFO to deploy the tax D&A solution based on an on-premises

implementation for a 3-year usage period. The high-level business case highlights:

— the potential VAT savings over a 3-year period across four countries,

assuming a comparable level of unclaimed VAT is detected

— the potential savings to the business in terms of mitigation of audit costs,

ﬁnes and/or penalties

— the costs of implementing the technology solution for the 3-year period,

covering one-off costs, maintenance costs and some minor new IT

components needed to implement the tax D&A solution.

The business case looked like this:

Transforming the tax function through technology

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Beneﬁts 3 Years (US$)

Direct (one-off) VAT/GST cash savings (unclaimed VAT/GST) Four countries for 3 years at US$28,700 per half year per country 688,800

Risk mitigation of potential ﬁnes/penalties For four countries, high-level assessment of likely interest/penalties 79,600

Reduction of manual work to perform monthly VAT 0.5 FTE per year per country 165,600

return checking

Total beneﬁts (3 years) 934,000

Costs

One-off implementation costs (incl. PoC) Consultancy fees to deploy the solution (incl. training) 119,400

One-off investment in IT components Fees for IT services (e.g. hardware) 23,900

Tax D&A solution usage fee, incl. maintenance (recurring) License fees over 3 years 71,700

Total costs (3 years) 215,000

Total net beneﬁt (3 years) 719,000

Source: KPMG International

What these examples highlight is that the same tax

technology solution, when proposed in two different ways

but for the same purpose, may give rise to two very different

outcomes. The outcome of any proposal is very much a

function of how it is positioned within the business, and

the ability to present a business case in a persuasive way

to stakeholders.

While this example may be overly simplistic, in the real world

there may be other more complex factors that can be used

to support any business case for change. Fundamentally

though, the task is always the same — it is around aligning the

beneﬁts from deploying the tax technology solution with your

organization’s overall strategy and objectives, and this may

mean pitching any solution as fulﬁlling objectives such as:

— providing stronger governance and controls, which

is especially important in organizations that may have

recently been subject to adverse audit outcomes, or self-

reporting of unexpected liabilities

— providing cost savings or efﬁciency gains to the

organization, through reductions in headcount,

overcoming manual processes or freeing up resources to

focus on high value added activities

— meeting new compliance challenges, which may

be as diverse as country-by-country reporting, new

R&D incentives or even an organization’s internal audit

requirements to enhance controls

— moves to adopt greater real-time reporting, which may

necessitate investments in insights-based solutions to

monitor data reporting

— measurement of tax function performance (or even

individual performance) through Key Performance

Indicators (KPIs) aligned with the successful deployment

of value creating tax technology solutions.

In addition to aligning tax technology investment decisions

with overall business strategies and objectives, consider a

few tips that may help to get investment decisions ‘over the

line’, such as:

— Do you really need to buy it? For many organizations,

large capital investments may be subject to greater

oversight and control, as compared with periodic

expenditure. Software-as-a-Service (SaaS) based solutions

may help to bridge that gap.

— Do you really know the cost or value to the

organization? In the above example, the savvy tax

manager was able to successfully deploy the tax

technology solution initially on a trial basis, which can

help to validate and quantify the potential beneﬁts to

the organization before committing to a longer-term

investment decision.

— Whose budget should the investment come from?

While the cost of tax compliance solutions would logically

fall within the tax budget, solutions providing insights

to particular aspects of your business operations, such

as an R&D technology solution, may reasonably have

their costs met by other parts of the business. Likewise,

infrastructure, accessories or components may serve

many parts of the organization and therefore their costs

allocated accordingly.

— Can you get some quick ‘wins’? Tax technology

solutions such as certain data and analytics solutions

can initially be deployed to ﬁnd tax savings, which in turn

justify the costs of deploying the technology solution.

The ﬂipside is to recognize potential ‘traps’ or hazards along

the way. For example, consider how to manage key risks in

deploying tax technology solutions, such as:

— the risk of premature redundancy — that is, the risk

that the technology solution or even the tax problem the

technology is seeking to solve may become redundant

earlier than anticipated. Access to regular updates as part

of a solution package should be seriously considered

— the need for maintenance and repairs — all technology

solutions require regular repairs and maintenance and this

should be packaged into any budget request

— the risk of cost overruns or delays in deployment —

the tendency for many IT-related projects to be subject to

cost overruns or delays is very real, and the same is true

with tax technology deployment. Project managing this is

critical, and so too is the need for input and ‘ownership’ by

your IT specialists.

Transforming the tax function through technology

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While all of these aligning features, tips and traps should form

part of your business case for investment in tax technology,

it is worthwhile to quickly summarize the key components of

any business case. They are:

1. What is the speciﬁc request you are making, and the

context in which you are making it?

2. What are the objectives in deploying this tax technology

solution, and how do they align with both your broader tax

function goals and your organization’s overall objectives?

3. What value or beneﬁts will this deliver for the

organization? Consider short-term versus long-term, and

ﬁnancial versus non-ﬁnancial beneﬁts.

4. How will the tax technology be deployed, what is

the timeline including key milestones, what is the

allocation of responsibilities, what are the key risks, the

dependencies, etc.?

5. What are the other available alternatives to deploying

this technology solution, and how do they stack up on a

comparative basis?

6. What other similar organizations are deploying this

technology and what has been their experience?

7. How will success be measured, and are there ways to

mitigate investment risks?

Finally, and perhaps most fundamentally, any investment

in tax technology solutions needs to be aligned with the

objectives of the business, and it must serve the business.

For example, consider how the deployment of any tax

technology solution aligns with your organization’s broader

risk tolerance, or how it aligns with your organization’s

governance procedures.

Transforming the tax function through technology

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Part C —

A glance

into the

future

Bots are another way of using

process and technology to solve

a problem.

They are best implemented

when there is (or can be) high

standardization and high volume.

Transforming the tax function through technology

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In this publication we described a framework that helps to determine, deploy and deliver on a tax technology strategy.

The ‘why’ question is fundamental and effectively provides the basis for the other three key questions (what, who and

how), independently of the type of technology being used. As such when we talk about new and emerging technologies,

these do not really affect the reason ‘why’ we deploy them — the ‘why’ is still to achieve beneﬁts in areas such as

efﬁciency, optimization, accuracy, insights, etc. However, new and emerging technologies typically impact ‘why’ is being

deployed, as well as ‘who’ you will need to deploy them, and ‘how’ to deploy them.

To better understand some of these new and emerging technologies, and how these can help the tax function in

the future, we have grouped a vast array of new and emerging technologies into two main categories — intelligent

automation technologies and distributed ledger technology (commonly referred to as ‘blockchain’). While these two

categories may not perfectly encapsulate the full spectrum of new and emerging technologies, it does provide a

framework through which to understand an increasingly complex and fast changing environment.

Intelligent automation

technologies

Readers may have heard of new and emerging technologie

with buzzwords like robotic process automation (RPA),

machine learning (ML), enhanced process automation,

natural language processing (NLP), artiﬁcial intelligence

(AI) and cognitive automation. It is not difﬁcult to feel

intimidated by this vast array of terminology, which

sometimes feels like it belongs to a dystopian universe.

In a recently published article in Tax Executive,

KPMG

professionals in the US helpfully clustered these

solutions under the banner ‘intelligent automation’, and

then equally as helpfully plotted the timeline for their

usefulness to tax and ﬁnance functions. The summary

below is extracted from that article, though with minor

modiﬁcations to remove US-speciﬁc references:

Stage one

Basic process automation

Cognitive automation

Enhanced process automation

Stage two

Stage three

‘Bots, Natural Language Processing, and Machine Learning’, Rainey, S, Brown B and Kirk, D, Tax Executive, 21 September 2017,

taxexecutive.org/bots-natural-language-processing-and-machine-learning/

Transforming the tax function through technology

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Stage one — Basic process automation

Robotic process automation, bots, process automation, basic

process automation, basic robotic process automation — these

terms describe essentially the same thing. Confusion often

arises from the term ‘robotic’ in robotic process automation;

why call such a solution ‘robotic’ if the automation doesn’t use

physical robots?

The short answer is that ‘robotic’ describes the underlying

process, not the automation. In other words, we are

automating a process that is naturally robotic, even if humans

perform it with manual labor. Such work is done the same way

over and over, like copying content from ﬁeld A and pasting

it into ﬁeld B. When we apply automation technologies to

this process — that is, we automate it — we consider that

solution a software robot.

Basic process automation (or, for simplicity’s sake, a ‘bot’)

leverages a class of technology to automate rudimentary

processes found in almost all organizations today. Many

tax departments have begun exploring the use of bots to

automate repetitive tasks.

You may be familiar with creating a macro within Microsoft

Excel. That macro typically automates sequential mouse clicks

within Excel. By analogy, in its simplest form, a bot is also a

macro. However, the bot is a macro that can sit atop multiple

software programs rather than be conﬁned within Excel. In

this way, bots appear to integrate various software programs.

In the past, a computer programmer could always write

software code to integrate disparate software programs.

However, the newer class of bot software has a user

interface where a tax professional can more easily program

a bot. As a result, professional software programmers may

be unnecessary.

The processes most suitable for basic process automation

are typically repetitive, involve multiple systems and follow

very explicit steps, such as when a human captures (cuts)

information from one system (e.g. the trial balance from a

legacy mainframe system), possibly reformats that data, and

then enters (pastes) it into another system (e.g. an Excel

spreadsheet).

These tools leverage capabilities such as workﬂows and rules

engines to automate existing manual processes.

The real power of cognitive computing

is its ability to ingest massive amounts

of data about which to formulate

hypotheses.

A particular bot program may reside on the desktop and run

at the user level (acting as human users, with system logon

credentials like users have), or it may be deployed on a server

and accessed by multiple users.

As an example, suppose your new tax software requires that

you set up a folder for every unique branch. The setup involves

selecting (or clicking) the same six options for each folder.

You click once to create the folder, click again to select which

branch you want, then again to indicate that you want all the

subfolder options, and so on.

Without being augmented with a bot, a tax professional would

be required to click 60,000 times just to set up the folders

needed to ensure compliance. But with a bot, because the

process is standard and repeatable, it can be automated using

the bot software, thereby reducing 60,000 clicks to a single

click. Once programmed, with a press of a button, the bot will

go through all 60,000 steps in a fraction of the time and far

more precisely than any human could.

In general, these basic automation tools can be thought of as

quick-hit technologies that allow for an incremental approach

to automation. Bots are another way of using process and

technology to solve a problem. They are best implemented

when there is (or can be) high standardization and high

volume. Like all tools, they have strengths and weaknesses.

Bots should be viewed as a supplement to other technology

tools; they may be great tools in speciﬁc situations, but may

not be the best in others.

Tax functions are often seen as being

more compliance-driven with less

focus on adding value to the core

revenue driving processes.

Transforming the tax function through technology

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Stage two — Enhanced process automation

Enhanced process automation leverages capabilities

beyond those discussed above. The tools/platforms involved

with enhanced process automation typically can:

— understand natural language (through natural language

processing, or NLP) and therefore interpret unstructured

data (i.e. data that is not organized in a predeﬁned

structure, such as free-form text)

— use machine learning (ML) to develop a knowledge base

by consuming signiﬁcant amounts of data to learn and

develop a set of algorithms. This set of algorithms is then

used to make predictions about data.

With these abilities, tools in this category can deal with

processes that may involve many complex transactions and

require a deeper level of analytics involving both structured

data (e.g. a database) and unstructured data (e.g. free-form

text). At the same time, these tools can leverage years of

experience gained across multiple sets of data, information

and knowledge.

A combination of natural language processing and machine

learning makes it possible to automate the capture, array and

analysis of unstructured data and transform it into structured

data that may be used in a tax application. Hence, the tax ﬁling

process may be expedited, and quality and consistency can

be enhanced by reducing the likelihood of manual errors.

In general, enhanced process automation tools are more

complex and take longer to develop and implement than

basic process automation. These tools typically also take

longer to integrate into the environment, do not reside on the

desktop and may require connections to the cloud to gain the

maximum beneﬁts.

Stage three — Cognitive automation

Cognitive automation is probably the most confusing and

most hyped technology but also holds the greatest potential

to revolutionize how you work. Not surprisingly, it also

requires the largest investment in time and dollars.

What is cognitive automation? Cognitive software mimics

human activities such as perceiving, inferring, gathering

evidence, hypothesizing and reasoning. And, like humans,

cognitive software is taught rather than traditionally

programmed.

In other words, while we program explicit steps into a

traditional computer to solve a problem, in a cognitive solution,

we teach the tool the area of interest, or ‘domain’. Once the

base domain knowledge is established within the software,

the cognitive solution typically continues to learn and solve

problems within that domain, generally all on its own.

A domain may include all or a portion of a tax regulation or rule.

The real power of cognitive computing is its ability to ingest

massive amounts of data about which to formulate hypotheses.

The human brain cannot handle this volume of data and does

not have the time to absorb it, let alone process it.

When cognitive solutions are combined with automation, these

systems can be trained to execute judgment-intensive tasks.

Transforming the tax function through technology

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What this means

When plotted on a graph, the evolution of these technologies

may appear something like this:

Complexity vs. time

Complexity/cost

RPA NLP ML CI/AI

Time (in years)

Source: KPMG International

Business

partner

Business

function today

Cognitive robotics Process robotics

Business

function 2020

Functional

business

Transactional

business

Business

partner

Functional

business

Transactional

business

Source: KPMG International

A concrete example for a tax function is to use RPA software

for periodic (often time-consuming) VAT/GST reconciliation

processes. These processes are repetitive and contain relatively

simple tasks: run ERP reports, load into Excel, compare and

match certain data points and produce a list of non-reconciling

items. By using RPA, the time to run such a process can be

reduced from 3 to 4 hours to a matter of a few seconds.

The diagram on the right illustrates how we foresee that tax

functions will change over the next 5 years and the role which

basic automation (RPA) and cognitive automation will play.

At this moment, most time in organizations is spent on

transactional (task-driven) and functional (reasoning)

processes. These functions are usually more internally

oriented, since they aim to support internal business

operations. Less time is spent on activities that truly add value

associated with being a business partner in the organization.

This is why tax functions are often seen as being more

compliance-driven with less focus on adding value to the core

revenue driving processes. Importantly though, the use of

RPA and cognitive solutions will enable those transactional

and functional processes to be largely automated, thereby

allowing more time to be spent on value adding activities,

more closely associated with being a business partner in the

organization.

Right now, as much as 80 percent of the world’s data is

unstructured.

What’s more, 90 percent of this unstructured

data has been created since 2011.

The ability to leverage

this data, meaningfully consume it and build the associated

knowledge ontology in an automated fashion changes the

promise of this technology.

While the tremendous upside of cognitive automation tools

is tantalizing, they generally require a much more signiﬁcant

investment in time and resources, including personnel,

training and dollars. The contextual learning stage alone can

represent an investment measured in years, not months.

These are not back-ofﬁce tools for which you can write a script

and ﬁre off an automation program.

The role of cognitive automation in the tax profession, and in

the business world in general, is still evolving. But we are still

in the early days of the evolution of these technologies, and

much has to be learned, developed and tested — and these

are not inexpensive endeavors.

‘Structure, Models and Meaning: Is‘Unstructured Data Merely Unmodeled?’ Seth Grimes, Information Week, 7 February 2005 informationweek.com/software/

information-management/structure-models-and-meaning/d/d-id/1030187?

‘Big Data, for Better or Worse: 90% of World’s Data Generated Over Last Two Years’, SINTEF, Science Daily, 22 May 2013, sciencedaily.com/

releases/2013/05/130522085217.

Transforming the tax function through technology

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Distributed ledger

technologies (i.e. blockchain)

One of the most hyped technologies over the past year

or so is distributed ledger technology, often referred to as

blockchain. The most widely known example of blockchain

technology is Bitcoin. However, while many people may

have heard of Bitcoin and some may have a rudimentary

understanding of blockchain, its use in the tax function is less

well known.

In its simplest form, blockchain technology or distributed

ledger technology (DLT) refers to a distributed database —

that is, data not being stored in a central place but rather,

decentralized across multiple platforms. At the core of the

blockchain are ‘digital ledgers’ that are distributed among all

network participants to serve as a common source of truth —

all parties store and access their copy of the database, but

with no single control hub holding a master key. In this respect,

one of the key advantages of blockchain is that databases

can be shared across many users without having a central

administrator who proves and validates all transactions.

Instead, blockchain transactions contain their own validity proof

so that the role of an intermediate authority in that transaction

(for example, a bank) may become obsolete.

The technology ensures that access to records in the

database is granted to the users that own the speciﬁc part

or a ‘block’. Blockchain therefore also feeds demand for

transparency, as the ledger may be public and searchable. It is

also almost impossible to change the information in the blocks

because all blocks refer to other blocks (the chain) and are

cryptographically protected.

The best analogy to describe how blockchain works is to relate

it to how real estate transactions may occur. Assume you are

buying a parcel of land. However, in order to buy that parcel of

land, you will want to prove that the seller owns the land so

that they can convey good title to you. Likewise, when that

seller wanted to prove title to the land they purchased, they

also sought proof of ownership of the land from the seller they

bought from. This process of proving each owner of the land

may repeat itself until such time as we establish good title to

the land right back to the original grant of the land use rights by

the local government. This is effectively what blockchain is. It

is a series of blocks that establish or record ownership or title

to an asset between parties. In reality though, this proof of

ownership is managed for us through the system of property

registration managed by the government. The variation in the

analogy in this case though is that blockchain allows private

parties to do this directly between them, without the need for a

governmental authority acting as an arbiter.

While this analogy may be helpful to explain the concept of

‘blockchain’, let’s use a different analogy to explain how it also

serves as a common source of truth.

If we remember back

to our school days in the playground playing lunchtime soccer

with our classmates, typically there was no referee, or in

transactional terminology, there was no intermediary. Similarly,

there was no scoreboard. Instead, the ‘source of truth’ in terms

of the score would always be the collective decision of the

players on the ﬁeld. This means that if a goal was scored and

accepted as being legitimate, both teams would acknowledge

the score was 1–0. In this sense, the source of truth lies in all

participants, and no single participant would be the arbiter. This

is again how blockchain works. Where the transaction follows

the rules laid down by the participants, the outcome of the

transaction in terms of how it is recorded in the blockchain itself

would be the source of truth.

Now there is one further concept that needs to be understood

before we examine the application of blockchain in a tax

context. And that is the concept of ‘smart contracts’. This is

a term we do not particularly like, because it ﬁrstly implies

that other contracts are somehow ‘not smart’, and secondly,

it suggests some kind of shortcut way to contracting. In

reality, even things like standard terms that are used by

many companies to manage straightforward commercial

arrangements for the supply of goods or services do not

replace the need for negotiation, in certain circumstances.

This analogy is adapted from the following blog - https://martinjeeblog.com/2017/10/10/the-best-blockchain-analogy-ever/

Transforming the tax function through technology

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated. © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.

The concept of ‘smart contracts’ really only refers to contracts

that underpin how the blockchain works, and are entered into,

veriﬁed and settled automatically. In the analogies used above,

the blockchain acts as the source of truth in terms of the

ownership of the land, or in terms of the score on the soccer

ﬁeld. But what ‘smart contracts’ seek to do is to expand the

blockchain beyond merely recording ownership or title to an

asset, to actually executing the transactions. In other words,

‘smart contracts’ attach to, and form part of, the blockchain

transaction to record not only the transfer of title but also the

commercial terms of such a transfer.

Although the concept of blockchain is very complex and

its potential application in the ﬁeld of taxation is yet to fully

emerge, we believe it may serve in the following areas:

— Helping to prevent VAT fraud.

Blockchain technology

can be used to link purchase and sale transactions and

therefore to ensure that the output VAT of the seller is

matched by the input VAT of the buyer.

— In facilitating the collection of taxes (like VAT) based

on the place in which goods or services are consumed,

for example, by validating the residency of the consumer.

While its application in many jurisdictions is mostly limited

to VAT, over time it is expected that taxes such as CIT will

move more from a source basis to a destination basis.

— In withholding individual income taxes, in terms of

both separating withholding taxes from salaries and

wages, and in automating the collection of those taxes

from employers.

— In transfer pricing, in facilitating proﬁt splits on individual

transactions for transfer pricing purposes, rather than on

an aggregated basis.

— Generally in supporting the tax collection process by

tax authorities. Tax authorities in various jurisdictions

have expressed ambitions to make the entire tax process

digital. This means providing 100 percent real-time access

to tax authorities’ systems for taxpayers, which enables

tax authorities to improve the tax collection process

signiﬁcantly. For tax authorities this will have a big impact

on how they are organized in terms of managing data,

which technology to use and which (new) people skills are

needed to support the digital tax process. The application

of blockchain in this area serves to provide secure and

auditable access to tax authorities’ applications.

— In a stamp duty context, it may be questioned whether

blockchain potentially poses a threat to it. Given that

stamp duty is traditionally levelled on documents, a shift

may be needed to ensure its continued application in an

entirely electronic environment of blockchain transactions.

— In electronic invoice issuing. Some governments have

expressed interest in using blockchain technology to

support the process of electronic invoicing. China, for

example, has announced its intention to do so.

‘Blockchain Technology might solve VAT fraud’, Ainsworth, Richard T, Shact, Andrew, Tax Notes International (Volume 83, no 13).

‘New Frontiers: Tax Administrations Explore Blockchain’, Johnston, Stephanie Soong, Tax Notes International, 2017.

Ibid.

Transforming the tax function through technology

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated. © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.

Overall, we see more and more use cases for the application

of blockchain technology, though we do not expect that it will

radically change the tax function within the next 2 to 3 years.

However, when thinking about your tax technology (digital)

strategy we recommend keeping an eye on the potential

beneﬁts and developments in blockchain for your organization

and whether your organization has the required skillsets to

adapt to the application of these new technologies. There

may also be opportunities to obtain a competitive advantage

by ﬁnding a way to use blockchain technology for better

interactions with business partners and even tax authorities.

Finding the right technology alliance partner may be a very

good ﬁrst step in this journey.

Blockchain transactions contain their

own validity proof so that the role

of an intermediate authority in that

transaction (for example, a bank) may

become obsolete.

Transforming the tax function through technology

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated. © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.

Conclusions —

Putting it

all together

Transforming the tax function through technology

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated. © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member ﬁrms of the KPMG network are afﬁliated.

By now, you should be ready to begin your tax technology journey, supercharged with our framework through which to

put your ideas and plans into action, and some pointers and tips on what to do and what not to do.

Now all that is left is to summarize how to do it through the following 10 pointers:

The embedding of technology into your tax function

is generally achieved incrementally (‘walk before you

run’), and recognize that it needs to be a permanent

feature of your tax strategy and plans. This cannot be

a ‘set and forget’ approach.

Any investment in tax technology solutions needs

to be supported by a persuasive business case.

This may require alignment with your broader

organizational objectives in better serving the

business (for example, to manage risk), through

efﬁciency gains (in terms of headcount reduction

spent on compliance), in the realization of real cash

savings, or to mirror technology developments made

by the tax authorities.

Transforming a tax function relies on technology

as an integral component of any transformation

strategy, but it must not be the sole component. You

need people with the skills to make the technology

work and to be maintained; your data and processes

need to work in harmony with the technology; and

your technology should serve to help you manage

risk and implement your governance framework.

Any investment in tax technology solutions needs

to ensure that these solutions work properly in the

markets in which you operate, and in the context

of your ERP systems and data security policies.

Also consider ways in which you can invest ﬂexibly

and in a more agile way, for example, through SaaS

solutions or trial testing, or in taking advantage of

updates that take account of regulatory change.

Before investing in tax technology solutions, make

sure you know ‘why’ you are trying to do it. Once

you know that, spend some time investigating and

considering ‘what’ you should do, ‘who’ should

help you to do it, and ‘how’ you should do it. This

is really about knowing the problem you are trying

to solve before you embark upon any investment.

Consider whether your tax technology strategy will

rely predominantly on outsourcing your technology

needs, or in-house development and deployment (or

possibly a mix of both), because this will impact on

your resourcing needs and your speed to market.

When you embark upon your tax technology journey,

expect to encounter unexpected problems. For many

organizations, once you have the tax technology in

place, the new challenge is around the integrity (i.e.

the accuracy and completeness) of the data feeding

into to your technology.

The two most common forms of speciﬁc tax

technology solutions are those solutions that

automate compliance, and those that provide tax

insights in helping you to either manage risk or

achieve efﬁciencies. Be realistic — automating the

tax compliance function is not like clicking a single

button and out pops a perfectly completed tax return.

Keep an eye out for new and emerging technologies

such as intelligent automation and blockchain, and

don’t be intimidated by them. If your organization

usually invests at the inﬂection point, then this

may still be a few years away before they enter the

mainstream. Following them now will help to ready

you for this change.

Any investment in tax technology solutions is like

building a house — you need strong foundations

(these are the accessories, components or

infrastructure), you need the walls and roof of the

house (these are the tax compliance solutions), you

need the concrete to hold the bricks of the house

together (these are the process management

solutions), and you also need the interior decorations

of the house to better enjoy it (these are the insights