Global indirect tax automation approaches How indirect tax benefits from major transformation and change
Presenters ►
Ronnie Dassen (Moderator) Ernst & Young LLP
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Frank Cambie EY Belgium
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Daniel Kroesen EY Netherlands
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Maria Hevia Ernst & Young LLP
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Global indirect tax automation approaches
Agenda ►
The need and opportunity for automating indirect tax globally ►
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Indirect tax IT landscape: what options are out there? ►
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Requirements, considerations and pitfalls (IT/supply chain/finance/tax)
How to build a business case for your global indirect tax approaches? ►
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Native Enterprise Resource Planning (ERP)/tax engine/compliance approach
There is no “one-size-fits-all” approach ►
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Global indirect tax management
Identifying triggers and making a cost/benefit assessment
Closing remarks
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Global indirect tax automation approaches
Managing global indirect tax obligations for your organization Tax life cycle Internal influences
• Strategic alignment with business • Help improve value • Alignment with risk profile
Strategy
• Cash flow and financial impact
• Integrated global process • Accurate, supportable tax accounts • Tools and technology • End-to-end reporting
• Risk management • Audit-ready documentation • Integrated with compliance • Binding rulings and voluntary disclosures
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Regulatory
Economic
Enterprise
Governance
External influences
Global indirect tax automation approaches
• Leverage provision data • Consistent global process • Timely visibility and status reporting • Real-time submission of transaction data
Industry
The roadmap to a leading indirect tax approach Formalized Indirect Tax (ITX) function with global responsibility
Documented processes
Advanced
Procedural guidance
Data analysis/controls
Basic
Indirect tax automation
Continuous control monitoring Work flow management
Leading Page 5
Global indirect tax automation approaches
A simplified version of the indirect tax landscape within any organization
Record
Gather and analyze
ERP
Market units
Expense system
Excel or CSV
VAT returns
Exception reporting Workpapers
Data warehouse Shared Services Center (SSC)
Report
Intrastat
Compliance software VIES*
Other
eFiling
Retention and archiving
XBRL
Workflow and information management
*VAT Information Exchange System
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Global indirect tax automation approaches
Overview of dedicated indirect tax technology approaches Tax Support
Vendor / Product
Use Tax Sales Tax VAT/GST Telecom Reports
Vertex / O-Series (CommTax) Thomson Reuters / ONESOURCE Taxware / Taxware Enterprise TaxJar / Smart Tax StrikeIron / Sales Tax Calculation Exactor / ExactOCalc CCH / Sales Tax Office (Suretax) BillSoft / EZTax Avalara / Avatax Excellent Page 7
Compliance
Good
Satisfactory
Poor
N/A
Global indirect tax automation approaches
Filing
Software Delivery Hosted
Onsite
Choosing the appropriate indirect tax approach for your company ►
Choosing the right technology approach is a delicate and complicated process; there is no “one size fits all” or “plug and play” approach.
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Some important questions to answer prior to selecting a technology approach are: ►
Does the approach accommodate tax determination in all my key jurisdictions?
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What reporting functionality does my organization need and does the technology approach I am interested in accommodate this need in all my jurisdictions?
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Is the approach I am looking at compatible with my existing ERP environment? What will be the level of configuration/customization?
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Can the chosen approach handle my supply chain structure?
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What does the price tag look like (initial fee, configuration fee, license/usage fee and maintenance fee)?
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What is the level of support a vendor gives me in case of troubleshooting, legislative updates, and irregular maintenance?
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Global indirect tax automation approaches
Key considerations for success 1.
The day-to-day decisions for transaction tax determination are primarily automated and driven by technology: ► Tax determination for AR and AP transactions ► Tax invoicing (including e-Invoicing) ► Automated intercompany settlements and billing, including AP postings ► Cross-border stock replenishments
2.
Manual intervention in the reporting process is kept to a minimum, with technology used to detect and control compliance failures: ► “Drill down” reporting; trend analysis, exception reports, audit reports ► e-Filing and e-Storage ► Workflow management
3.
Approach is scalable, sustainable and transparent.
4.
A successful implementation considers the organizational/change management risks: ► Participation of the business units in the chosen approach ► Regional/local process owners ► Early appointment of super-users in order to involve them in the early stages of the implementation/configuration
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Global indirect tax automation approaches
Pitfalls when implementing a global indirect tax approach
Missing master data
Unclear tax code descriptions and duplication
Lack of control around taxcritical master data
Potential risks in a global VAT automation are: Missing transactional data on invoices
Incorrect rates and G/L accounts set against tax codes
VAT risk
Tax codes not set up for reverse charge
Lack of clarity in VAT G/L account set-up Incorrect population of VAT treatment rules
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Global indirect tax automation approaches
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Changes in business models and transactional flows
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Lack of integration between tax and IT functions
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Loss of configuration knowledge over time, mainly due to staff changes
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Changes in local VAT legislation
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Inconsistencies in approach due to the creation of local workarounds and system “fixes”
So, how can I build a business case for a global indirect tax approach? ►
Look at organizational “life events”: Global business transformation is the driver for the indirect tax business case!
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US multi-nationals increasingly focus on centralization and standardization of their business processes ► ► ► ► ►
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Finance transformation Centralization of functions – SSCs Supply chain transformation Business integration or separation (mergers, acquisitions and divestments) ERP activity – new implementations or upgrades
Global indirect tax automation approaches
Other contributors to your business case… ►
There is a trend of US multi-nationals introducing central management of indirect taxes to their organizations. ► ► ►
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Keeping global indirect tax responsibility within finance, but imposing central oversight Making global indirect taxes an ultimate responsibility of the (corporate) tax department Establishing a global indirect tax director position
Changing indirect tax landscape ► ► ► ►
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Increasing indirect tax burden globally Increased reliance of companies and tax authorities on technology and automation for indirect tax compliance Increased focus on tax payers having proper processes in place to be “in control” of indirect tax Increased number of audits and the quality of these audits Global indirect tax automation approaches
How to approach building a business case for a global indirect tax technology approach? Main phases
Key activities
Current state assessment
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Approach requirements assessment
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Implementation impact assessment
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Cost/benefit assessment
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Existing ERP landscape and support systems Key Order to Cash (OTC), Procure to Pay (PTP), supply chain and logistics processes Key indirect tax requirements (tax determination and tax reporting) Data structure Existing roadmap for updates/upgrades Sustainability of current approach Known improvement needs Assess ability for approach to integrate with current systems Compare requirements with approaches functionality Data element requirements Develop/map implementation scenarios High level design Operating model needed to support approach Overall complexity of implementation Process change requirements System change requirements People change requirements Consideration of system upgrades/updates Implementation strategy Approach long-term sustainability Cost of maintaining current state approach Cost of potential new approach (hardware, software, people (internal/external)) Cost of potential new approach (maintenance, operating cost) Benefits of potential new approaches Overall recommendation
Global indirect tax automation approaches
Closing remarks ►
US multi-nationals have become very aware of their need to manage indirect taxes globally, but…
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US multi-nationals are also mostly not enabled to appropriately manage indirect tax on a global scale.
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Use change within your organization to build your business case.
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Global business transformation is the driver for the indirect tax business case!
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Global indirect tax automation approaches
Circular 230 disclaimer This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does not provide tax advice to any taxpayer because it does not take into account any specific taxpayer’s facts and circumstances. These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice.
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Global indirect tax automation approaches
Disclaimer ►
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the U.S.
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This presentation is © 2014 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of U.S. and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party.
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Views expressed in this presentation are those of the speakers and are not necessarily those of Ernst & Young LLP.
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Global indirect tax automation approaches
