In Deloitte’s paper, ‘Our digital future: A perspective for tax professionals’, published in 2019, five forces of change mentioned within the paper have already began to impact the daily routine of a tax practitioner:
- Data is becoming more widely available as a result of increased processing power and memory capacity;
- Automation is a reality and bots are likely waiting for the individuals to team with them;
- Use of artificial intelligence (AI) and related technology is helping to make better and more educated decisions;
- People, companies and governments are abundantly sharing information and knowledge online; and
- Open networks and ecosystems are allowing talent to connect to solve common problems.
While some companies are already leveraging such forces to foster digital transformation, many companies are still struggling to jump start their journey towards digitisation, which is only one part of the greater transformation context.
Whenever embarking on a journey towards digital transformation, companies will have to confront the way existing processes are designed and executed, assess how technology is leveraged and most importantly nurture a renewed talent mindset and skillset.
Changing may be quite challenging as real effort and commitment is necessary. Becoming digital is not just an upgrade. It requires a complete redesign. Previous beliefs may have to be abandoned. Foundations may have to be changed. People need to be at the core of it.
For those companies where the digital transformation train has not yet departed, some insights on how talent would look in a digital tax team are shared, as well as what tax administrations are doing, what others are still doing when it comes to automation and how AI can help further down the path.
A digital organisation will demand more from the tax departments. Leaders and practitioners coming from a traditional and standardised model of the tax function may require a complete reboot.
Skills traditionally associated with a tax professional, including finance, accounting and law will no longer be enough. A digital tax practitioner needs to acquire versatility in project management, process mapping, agile methodologies and innovation techniques. The optimised tax professional must become resourceful within the technology framework.
A digital tax department needs to be more diverse and speak different ‘languages’. Lawyers and accountants will be sharing virtual desks with technology experts, data analysts and individuals who are concerned about the user experience of the outputs coming from the tax department.
Individuals combining technology skills with business and tax acumen will have more chances of being successful in their digital careers. This does not mean that this optimised tax professional must be an expert in all those fields of knowledge. Instead, the ability to navigate the different nuances and perspectives from each player of this enhanced and coloured tax environment must be mastered as this will demand innovation, empowerment, connectivity and fluidity.
Internal and external ecosystems will play an even more important role for tax.
As a result of this new breadth of talent, a new digital tax department will rise. One that will be collaborative, proactive and data-oriented. It will be partnering with all areas of the organisation, promoting positive change by bringing strategic insights targeting at maximising value for the whole organisation.
Tax administrations on a global scale have already implemented technologies with the objective of becoming more efficient.
The pandemic has shown that doing it digitally is the right (if not the only) way to perform tax audits more assertively. Under these premises, tax authorities are transforming existing auditing processes by making them even more digital.
Increased processing power and memory benefits not only tax departments but also tax authorities, who can now run more sophisticated algorithms to detect inconsistencies and errors, tax evasion and frauds. Data collected by tax authorities via e-filings became a valuable resource. Taxpayers should do the same and benefit from data disclosed in such tax e-returns and e-invoices for getting business and strategic insights as opposed to considering it a residual product of the tax compliance process.
Considering that access to data is a reality to many tax administrations, another disruption is associated with real-time access to data. Real-time reporting is a reality for taxpayers in certain tax jurisdictions as there is a branch of variations of e-filing, e-accounting, e-matching, e-auditing and e-assessments for each country.
The next level of real time reporting may lead to accessing data directly from the taxpayer enterprise resource planning (ERP) and/or consolidation environment, or (more likely) in a data environment that might be extended to third party sources. It will not be long before the tax authorities’ data analytics solutions will replace tax filings and digital audits. Do not be overwhelmed but there are already situations where tax authorities are taxing transactions regardless or even before they are recorded at the ERP.
Tax administrations are also engaged in strategic pilots, sharing information on lessons learned and best practices with each speeding up their digital strategy.
This requires enterprises to comply with this new and enhanced environment where companies will be confronted with smarter tax administrations. As a result, tax compliance will be elevated. As a tax practitioner or a tax leader, manage your data accordingly. Be sure to adopt strategies, processes and relevant technology to mitigate errors from the start of a business operation or transaction. Augment your capabilities with appropriate technology. The control framework must become more powerful to identify, classify, prevent and implement corrections automatically in a timely manner (or instantly).
When it comes to process automation, more digitally mature organisations have successfully implemented robotics process automations (RPAs) and have moved on to new technologies.
However, this is not the reality for all companies. Some companies are not focused to put real effort and strategy into RPA. Some companies are still handling most of the work without the appropriate process or technology. Other companies who tried unstructured RPA experiments are now ‘stuck’ and suffering from many different issues, due to IT gaps, process complexity and unrealistic expectations.
The maximisation of the RPA impact requires a paramount shift in mindset. The adoption must be based on a committed approach, moving from experimentation to transformation. To make it happen, organisations need to take the right strategic choices – building the right foundations to enable the new digital workforce in paving their path in the direction of a tax department that brings competitive advantage for the organisation.
RPA solutions must be considered and used as enterprise platforms: they allow the automation of several kinds of activities. It makes even more sense when looking to the expansion of the digital workforce particularly after the pandemic. The initiative should be embraced by the whole department, not just to cover a few activities, and the adoption should be supported and led from the top. Results show that this seems to be best practice.
Not all RPA journeys start with a department-wide scope, but the mindset should be ‘think big, start small’. Many organisations have started automating the most repetitive tax activities. Once proven, positive results can be used as showcase to the stakeholders and help the leaders ‘think big’ about the broader opportunity across the tax department.
When it comes to scaling RPA, we may see the ambition of the organisations reported at the ‘Tax of Tomorrow Tax – Technology and resources for tax challenges within organisations’ survey released by Deloitte Brazil in 2020 where 98% of the respondents understand that the data entry and classification will be automated soon.
The process mapping and standardisation is another challenge faced by organisations across all different stages of the RPA journey.
Process with complexity drives complex robots: it increases the cost and requires more sophisticated design to implement the RPA (ideally: RCA). Robots require detailed process accuracy and need to be understood at the keystroke level.
Organisations are concluding that processes are not always well understood, even when supported by existing documentation. Operations that may look standard, often differ significantly in reality, and even across different business units. The implementation team needs to work closely with the business users to fully understand the detailed processes and automate it accordingly.
In many organisations, RPA adoption is also pushing the workforce towards upskilling: understanding the RPA architecture, close involvement with RPA developers and robots’ operators, these new roles have just a few subject matter experts.
To fully embrace the potential of robotics (and AI), businesses will need foster a new skillset for the tax workforce so it can work alongside the robots, creating an ‘augmented’ workforce, enabling people to focus on higher added-value activities.
This new digital mindset is found in the most progressive tax departments which are generating deeper insights from the large volume of unstructured and structured data available. Such tax departments raise the level of tax compliance, helping business leaders identify big issues and seize new opportunities.
Tax departments are applying advanced AI and analytics tools that can generate and draw conclusions and predict situations from multiple data sources, providing a purpose-built solution for daily challenges faced by tax departments and their business partners. The good news is that the use of such technologies is becoming more democratic with proven use cases, and some organisations have begun to build work processes based on them, enhancing the individual’s analytics capabilities.
The adoption of cognitive and AI-related technologies can help tax departments analysing compliance data to help business leaders to predict trends, spot anomalies, expose inconsistency and reduce effective tax rates. It can also be used to verify in real time the tax treatment of each transaction identifying gaps instantly and addressing the issue using an adaptative decision making intelligence.
AI and analytics may enable thorough and comprehensive use of the full power of data to enhance the tax function’s efficiency and generate value to the company, while enhancing other parts of the business.
Based on the results of the survey ‘Tax of Tomorrow Tax – Technology and resources for tax challenges within organisations’, 96% of organisations believe that AI and cognitive technologies will optimise tax analysis. However, the survey shows that 25% of the surveyed companies still have manual activities related to the invoicing process. Automation is not a reality for other activities such as tax calculation, where 50% of organisations have manual work to process the goods and services tax calculation.
While many organisations started their journey through AI enhancements, there is still potential for the adoption of automation technologies such as RPA. For those, RPA may free up tax practitioners time, engaging them into the adoption of technology where benefits can be harvested in the short term and pave the way for the implementation of more complex and sophisticated technologies.
The future of the tax function is not about technology, it is about technologically augmented practitioners who will benefit from collaboration and knowledge sharing for dealing with complex issues.
The future will be a place for those digitally enabled individuals who will support their positions on massive data sets allowing educated, timely and accurate decision by the tax department and its stakeholders.
Inner and outer forces of change are setting the pace for this transformation. Business partners, clients and tax admirations are becoming more demanding and harder to serve.
Combining recently consolidated with emerging technologies can be very powerful to overcome past, current and future challenges. The ability to adopt and leverage from these technologies may lead to promising results.
Organisations should not overestimate the impact and benefits deriving from the adoption of technology in the short term. Some people create an expectation that things will get resolved at the ‘push of a button’.
Companies should also not underestimate the achievements resulting from technology in the long term. The answer for addressing unknown disruption resides with future-ready tax professionals working in digital tax departments where processes are structured to embrace innovation.
Transformation in tax is a journey. Many organisations have already started their journey. Have you?
Aleksander Ogatha is a tax technology senior manager based in São Paulo with over 15 years of experience supporting business tax and VAT and 10 years’ experience in tax technology solutions and projects.
Aleksander joined Deloitte Brazil’s business tax team in 2007. In 2012, he moved to the tax technology practice as a manager and then joined the Deloitte global tax technology team in 2017, working with global technology practitioners and with worldwide endorsed solutions in different regions. He very often works on multidisciplinary projects focused on VAT and business tax planning and compliance.
Aleksander is also a product owner for tax solutions developed by Deloitte Brazil focused on compliance automation. He is a lawyer, accountant, and technologist in system analysis.
Gustavo Rotta is a partner leading the tax technology group in Brazil as well as the partner leading Deloitte Brazil’s innovation committee.
Gustavo has accumulated more than 20 years of experience in tax advisory, tax planning, foreign capital legislation, merger and acquisition (M&A) services, corporate reorganisation, tax compliance, tax technology and automation, ERP implementation and tax localisation, including projects related to Sistema Público de Escrituração Digital – SPED.
Gustavo has also advised multinational clients on tax and business matters related to multinational joint ventures, counseled clients on structuring and restructuring national and international transactions serving clients in the manufacturing, retail, telecommunications and services industries.
Gustavo is a regular speaker at tax and tax technology seminars and training programmes in Brazil. He holds a bachelor’s degree in business administration and a bachelor’s degree in accounting.
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