The digitalisation of tax is gathering pace, as tax leaders know only too well.
Five years ago, not many of us were predicting a time when most tax authorities would require real-time, digital reporting and e-invoicing. Today, however, it’s just a question of when.
In the digital economy, authorities are increasingly demanding real-time transaction (supply and invoicing) data. This has led to a constant stream of new regulations, impossible obligations and timelines, last-minute rule changes, and a disconnect between government legislation and regulators’ technical specifications.
For businesses – particularly multinationals – the experience has been disruptive to say the least.
But while authorities don’t wish to create endless complexity for taxpayers, their direction of travel isn’t going to change. In fact, regulators are actively looking to harmonise their approaches as they push forward with the digital tax agenda.
Globally, all invoicing and tax reporting will eventually be done in real time. Correcting, amending and adjusting your data after the fact will no longer be acceptable. Ultimately, the traditional tax return will become a thing of the past.
Such fundamental change requires a strategic response from tax leaders.
Automating your invoicing and tax reporting is much more than an efficiency drive; it’s a business-critical issue, with real risks to business continuity. Imagine your raw materials being stuck at the supplier’s warehouse, while you wait for an invoice to be approved by the local tax authority.
This is why digitalisation must be top of the agenda for Heads of Tax. Multinationals need strategies in place now for the adoption of digital tax reporting and e-invoicing.
The tax function will need to lead this transformation, working in close collaboration with finance and IT; global and local teams; and external partners and service providers.
Steps to success
So how can you get ahead of the tax digitalisation curve – and stay there?
In my experience, there are five essential steps to planning your shift to the digital tax function of the future:
- Keep tabs on developments
Monitor the latest announcements from tax authorities around the world – you can use our E-invoicing and Digital Reporting Global Tracker to do this.
- Identify what needs to change
Make sure you have a clear understanding of:
- your main invoicing and reporting data sources
- the systems and processes affected by digital taxation
- the key stakeholders involved
- Consider the wider implications
Tax processes and data don’t exist in isolation. Changes to your operation must align with IT and finance (in particular, accounts receivable and payable). Indeed, your transformation programme may need to go beyond the tax function.
- Put strong governance in place
Define and implement a robust transformation governance model – with a dedicated programme manager, and a steering group involving tax, finance and IT. Standardise your approach to digitisation between territories as far as possible. Ensure the necessary real-time data is available, and look to outsource e-invoicing localisation.
- Assess your options
What systems, process and solutions will you need to meet digital taxation rules? Are any of your existing methods adequate? Can you make use of government tools, or should you invest in dedicated e-invoicing and digital reporting software?
Our tax transformation experts can support you through these steps, and with the implementation of your tax function transformation. Please get in touch to find out more about how we can help.