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They must also consider the bigger picture and how the overarching global trends of global trade, transformation and sustainability shape the indirect tax function. This is the second of a four part series of articles that dive deep into each trend to help leaders frame the indirect tax discussion within their business, navigate the challenges and grasp the opportunities.
The ever-evolving global indirect tax landscape creates challenges for many tax functions and highlights the importance of having a practical transformation roadmap from the outset.
Tax authorities now have more visibility of data, while there is an increased drive for efficiency in tax departments and a push to add real value. They must do so while contending with budgetary constraints, talent and increasingly complex regulations. How can indirect tax leaders prepare for transformation? There are leading practices to live by, but while many functions will recognize that these actions are important, carrying them out can seem daunting. How do you know where to begin?
André Hengst, EY Germany Indirect Tax Leader, Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, advises targeting short-term gains where you "can free up capacity to ensure that your tax and technology people have time to focus on the more substantial tasks." Many companies are looking at automating the core tax tasks like indirect tax business support, controls and return filing as well as tax audit management. "Long term, you should be shaping and sensitizing the entire tax-relevant data model to benefit from the highest levels of indirect tax automation," he adds.
Data drives transformation
The trend that has had the most significant transformation impact on tax authorities' approach to indirect tax administration is the shift from paper-based reporting to real-time digital reporting in its various forms. E-invoicing, for example, is completely changing the landscape from an indirect tax perspective. "We have organizations having to deal with both the old world of reports and compliance returns as well as the requirement to submit an invoice daily to a tax authority. That's a complex world to deal with for a multinational. Just keeping up to date with the compliance of implementing new systems and processes is enormous for clients," says Kevin MacAuley, EY Global Indirect Tax Leader. He believes data is the key to successful transformation for indirect tax functions. Businesses need a strategy around data and the shift in data requirements. Indirect tax departments need to engage with the wider business.