Latin America: Regional interview
1. What is the most significant change to your region/jurisdiction's tax legislation in the past 12 months?
One of the most recent changes, and one that has occurred in several Latin American countries, is the transformation of the fiscal and customs operational and reporting platforms to become electronic. A new legislative foundation has been issued to support the automation of both operational and tax audit procedures and to establish the rights and requirements of both the taxpayer and relevant authorities.
2. What has been the most significant impact of that change?
Everybody is learning – on one hand, organisations are increasingly deploying digital technologies to comply with the new tax authority requirements. They are adjusting their information technology (IT) environments and increasing the rigour of their compliance processes to respond to the tax authority mandates, which include stronger compliance validation methods and systems.
On the other hand, authorities are also learning how to take advantage of automation, working on the electronic audits for all types of tax and to become more effective in their detections, increase the tax payment rate and invest less in the auditing procedures.
3. How do you anticipate that change impacting your work and the market moving forwards?
In the past, tax authorities needed to rely on taxpayers' cooperation when conducting an audit. But now, by deploying digital technologies, a full-fledged audit is possible without involving the taxpayer. In response, organisations are also changing from being reactive to proactive. Deloitte in Latin America is helping clients adjust their tax strategies and systems to not only comply with the new mandates, but also to reconcile their financial data with reporting requirements.
The key element is to have visibility of an organisation's transactions, to be ready for any kind of electronic audit procedure and to anticipate and self-correct, where applicable. This approach requires upfront investment but will generally be less expensive in terms of both time and money than waiting for the governmental detection, which will often also imply fines and penalties.
4. How has this changed the way you offer tax advice?
Historically, our services were geared more towards verifying transactional compliance. Now, though, we are having more strategic conversations with clients about their tax function and are working with them across the tax cycle: determining tax treatment, setting up the systems, extracting data and reporting to authorities. In addition to focusing on the processes and technology, we are working with clients on creative solutions to transform their IT infrastructure and systems, including innovative technologies like robotic process automation (RPA) and other enabling tools.
5. What potential other legislative changes are on the horizon that you think will have a big impact on your region/jurisdiction?
We expect the tax authorities' use of technologies to continue and broaden across the region, including the deployment of advanced analytics in audit such as Brazil's public digital bookkeeping system, SPED. We also see continued legislation aligned with the increase of digital services and the digital economy, including the tax obligations of foreign providers of web-based services.
6. What are the potential outcomes that might occur if those changes are implemented?
Organisations will continue to make significant investments in technologies to be compliant with the exponential increases in the volume, frequency and detail of data requests from government authorities. Also, organisations will face additional tax obligations related to the treatment of foreign taxable persons providing digital services, which is an entirely new taxation concept in Latin America.
Regarding tax authorities, we expect the sophistication level of the tools utilised for tax underpayment to rise, since it will support increased income/tax collection for Latin American governments.
7. Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?
Due to the investments in process and technology improvements that must be made in response to the new government mandates, we expect to see a positive effect as we support clients and guide them through the resulting changes to their businesses.
For clients, the additional investment in technology, procedures and training will drive best practice implementation and efficiency for organisations and expedite commerce, which should in turn promote stronger economies.
8. How are issues surrounding the taxation of the digital economy affecting your jurisdiction?
One important impact, at least in the area of indirect taxes, is that increased self-correction is resulting in increased tax collection and more companies are reaching out to the government to regularise their current status.
It is, however, a temporary effect since over time companies will learn how to deal with technology and procedures and will experience fewer unexpected corrections.
Cecilia Margarita Montano Hernandez
Deloitte Mexico, Global Trade Advisory Leader
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