Companies use a variety of enterprise resource planning [ERP] systems to collect the data necessary to facilitate compliance with different taxes in the jurisdictions where they operate. Often, teams will internally customise aspects of these ERPs for ease of use.

But, these customisations can make it difficult to be agile and respond to changes in the law or in business practices, said attendees at International Tax Review’s Tax & Technology Forum in London.

“Our SAP [a commonly used ERP system] is very customised,” said one attendee. “It’s a platform with some standard functionality but needs to be customised. Unfortunately our business decided to highly customise it as people had different views on how it should work.”

“Next time there is an SAP discussion I’ll really push for a standard solution,” he added.

Despite this, 30% of attendees said that their tax technology system needed improvement, when polled, and 9% wanted to create a bespoke solution internally.

A further 9% said their tax technology system worked well; 15% said they were looking at tax technology solutions but had no plans to implement one yet; and 15% were looking to implement an off-the-shelf solution. The remaining fifth answered “other” or “don’t know”.

“When you implement ERP systems it’s not necessarily a magic wand to fix everything,” said one attendee.

Speakers also warned that when designing, or customising, compliance systems that it’s important to take processes and workflow, as well as existing ERP customisations, into account.

This is why, argued one speaker, solutions simply implemented off the shelf or designed by tax advisors that do not take into account the intricacies and peculiarities companies have built into their ERPs are doomed to failure.

“If you have a tax solution designed by a tax advisor it will fail, because your advisor knows everything about the legal, but not about how you use the system and your workflow,” said one speaker. “It’s important to have someone who understands your ERP system and the complexities you’ve built into it.”

“In reality, the reason so many tax solutions fail is due to a lack of a holistic approach,” said one attendee.

The need for agility

Therefore, argued one speaker, it is better for companies to try and use a standard approach wherever possible. Customisations that make it harder to use advice from tax advisors only mean companies are less able to respond to changes in tax laws or compliance requirements.

Countries are increasingly introducing requirements at very short notice. A well-known example of such a law is the US Tax Cuts and Jobs Act, which was signed into law just days before its effective date.

In the field of compliance requirements, Italy’s regulations for the ground-breaking e-invoicing system were only finalised on December 19 2018, ahead of their effective date on January 1 2019.

"We were expecting that the Italian tax authorities would clarify the rules. But the tax authorities' clarification and explanation – they are not deep, they are not as sophisticated as the questions are. And so there are a lot of doubts, honestly," Paola Flora, director of tax at UBI Banca, told ITR at the time.

In both countries, the timing was awful because most employees in these countries take an extended break around Christmas, giving precious little time to get systems in order.

To give more flexibility, several speakers and attendees said that one thing companies can do is reduce the amount of customisations to their ERP systems.

“The best thing about a cloud-based ERP system is the lack of customisations,” said one speaker. “This forces you to change processes you’ve used forever because nobody-knows-why. It can be a painful process, but it’s a way of cleaning house.”

Of course, reducing the amount of customisations can slow things down, and force companies to change processes that work effectively. It seems a counter-intuitive step.

But, tax directors and those involved in tax technology have a responsibility not just to compliance and efficiency, but in creating systems that their colleagues and successors can modify for challenges not yet spotted or conceived of.

In reality, the reason so many tax solutions fail is due to a lack of a holistic approach.