Identifying solutions to strengthen your tax team’s data capabilities when a next-gen ERP transformation is further out on the IT roadmap.
The need for greater tax data capabilities is only growing in urgency. Tax authorities are demanding greater transparency from corporate organizations and shifting toward digital tax administration. Country-specific rules are changing amid global tax reform efforts and the tax function is likely to see a growing need for system features and data granularity that will make country-level reporting possible, among other new requirements.
Deloitte research shows that tax leaders see new challenges coming quickly. In a survey of more than 300 tax and finance executives at large companies, 70% said they expect tax authorities will have more direct access to their systems over the next three-to-five years.
Many companies are addressing their evolving tax data needs through the implementation of a next-generation, cloud-based, Enterprise Resource Planning (ERP) system. For some enterprises, however, such a comprehensive ERP transformation isn’t on the immediate horizon, leaving them hunting for other solutions. As tax requirements advance, they risk falling behind. Of the companies in the survey that have not yet implemented a next-gen ERP system, almost a quarter said their ability to do scenario planning—to assess the impact of OECD Pillar 1 and 2 reforms to international tax rules—was “somewhat” or “very weak”.
Against this backdrop, any tax organization not yet moving ahead with an ERP upgrade needs a plan to keep pace. Deloitte helps clients build data management solutions for today and the future, including flexible, operations-focused outsourcing options.
This useful infographic can help you assess your company's options when it comes to data management solutions outside of a short-to-medium term next-gen ERP implementation.
One option to keep pace with developments is to establish a data warehouse owned by the tax department. This can boost capabilities relatively quickly, even when a comprehensive ERP upgrade isn’t feasible. The tax data warehouse can optimize the management of existing ERP data and align it for tax purposes by providing a central store for all source data, calculated results, and reported values. It can enhance processes within the tax function and significantly reduce the amount of time necessary to optimize data vital for tax calculations, analytics, and reporting.
A preferred option for many tax organizations is to implement a data warehouse utilizing a third-party data management solution. These out-of-the-box solutions include accelerators that allow streamlined implementations, without heavy involvement of the IT function typically required with custom data management solutions. Third-party solutions include a user-friendly front-end, which streamlines and simplifies data management tasks, along with governance and controls.
With a third-party data solution, the tax department gains anytime-anywhere access to the key data and information required for tax and regulatory compliance and planning. A tax data warehouse will also improve the tax department’s global visibility into tax and legal obligations and enable a more agile response to regulatory scrutiny.
Some companies don’t allow third-party hosting of their data, which may make implementation of a third-party data solution impossible. In such a situation, an internally developed data warehouse may be an option, using an existing, approved cloud service infrastructure. This approach is likely to take more time to create and test and will require heavy IT involvement.
The combination of regulatory changes, a push for greater transparency, and broader demands for data-driven insights, builds the business case for equipping the tax function with better data management capabilities. For many organizations, implementation of a next-gen ERP system solves many of their source data issues—and the sooner the better. For companies where this is not possible, third-party data management solutions can bring significant value and advantages.
The benefits of a tax data warehouse are still realized, whether a next-gen ERP system is four or more years out, or whether the organization decides to implement one sooner than expected. Every step taken today to better understand and manage tax data will pay dividends in the future by helping to define tax data requirements and influence the next-gen ERP design from the outset. Additionally, a tax-owned data warehouse can be the ideal environment, where ever-changing tax rules are managed and applied to data, without requiring expensive ERP modifications.
For successful tax data management, organizations should create a clear technology roadmap that sets out the timeframe for transformation, the ideal end state, and interim solutions that may be needed along the way. Identification of the business drivers for tax data and a targeted approach, through use of a tax technology roadmap, will help tax leaders make the best use of internal resources and outsourcing partners along their transformation journey. In considering the role of outsourcing, tax leaders need to look—process by process—to determine which approach will do the most to accelerate their team’s transformation.
Deloitte is a recognized global leader in tax technology and data management, with an established network of experienced professionals around the globe. We help organizations design and manage their tax function and operating model through a tax technology ecosystem that aligns to the enterprise vision. To learn more about how Deloitte can help your organization navigate tax data management decisions, visit Tax Technology Consulting & Support | Deloitte.
Tax Managing Director
Deloitte Tax LLP
Tax Senior Manager
Deloitte Tax LLP