Company boards are increasingly concerned about tax compliance and planning, partly because of initiatives such as Making Tax Digital for VAT and automatic exchange of tax information, driving a 20% hike in investment in tax technology
The latest Thomson Reuters’ 2019 tax technology survey found that three quarters (76%) of senior tax executives have seen an increasing focus on tax compliance and planning at board level, while virtually all respondents (98%) plan to invest in tax technology over the next 12 months, compared with only 54% in 2018.
Of those, 28% plan to increase spend significantly while the remainder expect spending to increase slightly (32%) or remain stable (38%).
The survey shows that the main driver behind the anticipated investment is the rise in digitally capable tax authorities.
Almost half (45%) of respondents said that they had started or have plans to implement digital tax filing and compliance for new standards such as Making Tax Digital and standard audit file for tax (SAF-T), the OECD’s international standard for the electronic exchange of reliable accounting data.
However, the number of respondents reporting that they are being asked to provide more detailed information to support tax filings has fallen from 52% in 2018 to 32% in 2019.
Analysis suggests this significant drop could indicate that some tax authorities, such as Poland, are well advanced in their SAF-T introduction and starting to see the level of detail they require coming through from corporate tax departments.
Steve Smith, proposition lead, corporates at Thomson Reuters, said: ‘There’s clear evidence from Poland and Spain that implementing new digital and near real-time reporting obligations yields significant return in tax revenue.
‘It’s inevitable we will see more and more jurisdictions following suit in the coming years, and multi-national corporations need to be prepared to address these requirements with future-proofed technology solutions.
‘Furthermore, the report indicates that many tax departments are looking to centralise and manage compliance across multiple jurisdictions in response to the continued globalisation and digitalisation of tax.’
Whereas the General Data Protection Regulation (GDPR) was the major legislative issue affecting organisations in 2018, this year 23% of tax professionals reported that one of the key challenges facing their tax department is Brexit.
The need to keep up with new regulations and processes was also cited by respondents, with a 20% year-on-year increase to 36%. Furthermore, 30% of departments recognised the need for increased efficiency for internal processes and workflow, a 12% increase from 2018.
The results also show an appetite within tax departments to adopt in-house technology, rather than outsource, suggesting a desire to take control of digital tax transformation. In addition, the poll shows a year-on-year hike of 20% in interest in new technologies to gain competitive advantage and stay ahead of tax authorities.
In particular, activity around big data analytics is now up to 60%, blockchain 39% (up from 16%), artificial intelligence (AI) and machine learning 50% and robotic process automation (RPA) 56%.
Smith said: ‘This interest in new technologies indicates that tax departments are recognising that the deployment of tax technology can help increase efficiencies, reduce human error and deliver a consistent and manageable way of addressing these new tax regulations.
‘Compliance is in the midst of a revolution, and looking forward we can expect to see more regulatory attention to the process and governance rather than the end number. In a digital world the tax authorities will easily be able to validate the output. Tax teams need to prepare for this shift now.’
The 2019 survey polled 438 tax teams across a wide range of industries, including banking, manufacturing and services. Participants represented a cross-section of business – from companies with fewer than 1,000 employees to corporations with over 10,000.
By Pat Sweet