Why indirect tax is a leader in the shift toward tax managed services
Indirect tax is resource-intensive and operationally complex. With scalable talent and leading technology, a managed services model helps efficiently manage data volume and tackle global compliance.
Tax managed services has emerged as a solution to strategic and operational challenges faced by tax departments across many areas of tax. It is particularly promising in the complex area of indirect tax, where workload, resource and cost pressures are especially intense.
Unlike transactional compliance outsourcing and co-sourcing, a managed services model is a comprehensive, end-to-end relationship between the tax function and the service provider. The service provider brings technology, scale, and efficiencies to enable the client to drive effectiveness, reduce risks and costs, and deliver significant value to the business.
Indirect tax: Too many. Too much. Too complex.
Managed services and indirect tax go well together. This is a particularly complex, or “noisy,” area of tax that is becoming increasingly difficult to manage internally.
Indirect tax operations are highly challenging, requiring teams to wrangle large volumes of data from multiple systems with disparate fields to comply with diverse tax laws and jurisdictions. Just in the U.S., there are 16,000 taxing jurisdictions, and at KPMG LLP (KPMG), most of our clients have multinational footprints compounding the complexity with different rules, regulations, and timelines. Deadlines are generally monthly, not annual, and companies also face ever-increasing momentum toward real-time reporting. Simultaneously, jurisdictions are getting increasingly aggressive with audits, using technology to get better at pinpointing opportunities.
Combining sales and use tax, excise tax, property tax, environmental taxes, unclaimed property, and the growing desire by governments worldwide to tax companies for simply selling into a jurisdiction, the complexity grows exponentially.
The tip of the spear: Cutting through noise with technology
Recognizing the above, KPMG has made significant investments to be at the leading edge of indirect tax. We are proud to say our first rebadging opportunity—transitioning a client’s tax professionals into KPMG to deliver tax processes more efficiently and effectively—was in this space. We’ve implemented hundreds of different automations of indirect tax processes in order to deliver monthly returns correctly and on time, to help ensure our clients fully comply with applicable tax laws across jurisdictions. Furthermore, we are spearheading use cases to apply generative artificial intelligence (GenAI) to further accelerate our delivery time and client benefits.
Innovations in technology are transforming how we deliver indirect tax as a service provider. Traditionally, we focused on reporting and compliance ahead of analytics. Now—thanks to new technology, like GenAI, that enables us to sift through huge volumes of data in a very efficient manner—we can make data-driven adjustments before the compliance process starts. We can also deliver valuable new insights to business decision makers by identifying savings opportunities or potential exposures in those analytics. Looking forward, we’re even seeing an evolution where tax calculation, analytics and compliance merge into a single function.
Emerging tech is propelling interest in tax managed services
Getting access to new technology capabilities that can manage the complexities of the indirect tax space at speed and scale is of tremendous importance to tax and finance leaders seeking to become more strategic and cost-efficient. Weaving advanced technology throughout a tax managed services model, allows companies to take advantage of optimization at every data touch point throughout the indirect tax lifecycle in ways they could never have done utilizing only in-house resources and technology. This includes tax calculations on sales and purchases, VAT/GST compliance and reporting, and property tax and unclaimed property processes.
While technology types and applications are many and multifaceted, they share some common themes:
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Bringing it all together: KPMG Tax Managed Services
KPMG Tax Managed Services integrates technology, people and processes to solve needs around indirect tax—and make it scalable.
The platform experience connects all the dots
Our indirect tax managed services and capabilities revolve around a technology-enabled platform experience. It starts with helping you define what input data you need. It then applies technologies that allow you to retrieve that data and execute on indirect tax—everything from building the right queries from your ERP to using various data technologies.
It then maps that data into a model by defining how you’re going to use the data, what data points you need to plug into all the downstream technologies, and where your data gaps are. This requires process tools like machine learning or GenAI that can analyze and organize data and feed it back into the tax engine and compliance systems for better decisions, more consistent classifications, and compliance throughout the indirect tax lifecycle.
The KPMG platform provides both clients and your KPMG team with a best-in-class experience that leverages the most advanced technology in the industry. It delivers a single client experience that cuts across the indirect tax life cycle including controversy, compliance, and planning and includes all indirect tax verticals.
Access to the power of a strong tax engine
Indirect taxes are generally one of the top taxes paid within an organization. Errors can not only directly impact the customer experience but can lead to significant penalties across global jurisdictions. Companies need to know what they are getting right and wrong, where they can optimize resources, and how they can add value.
A rigorous tax engine connected to good data, optimized for the user experience, and enhanced through constantly innovating technology creates tremendous benefits for your employees, your tax department, and your entire company. Only a few firms, including KPMG, have the rights to license some of the top tax engines directly and can bundle them into the overall managed service relationship.
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Meet our team
Indirect tax is an extraordinarily complex space, and that complexity is rapidly increasing. Working with KPMG, a managed services alliance could significantly simplify your company’s resource burden, drive home efficiencies, and improve your strategic picture. Our team of tax specialists is ready to work collaboratively to accelerate your tax function of tomorrow—today.
