Global indirect tax automation approaches: How indirect ... · PDF fileGlobal indirect tax...

Global indirect tax automation approachesHow indirect tax benefits from major transformation and change

Global indirect tax automation approaches

Presenters

► Ronnie Dassen (Moderator) Ernst & Young LLP

► Frank Cambie EY Belgium

► Daniel Kroesen EY Netherlands

► Maria Hevia Ernst & Young LLP


Agenda

► The need and opportunity for automating indirect tax globally ► Global indirect tax management

► Indirect tax IT landscape: what options are out there? ► Native Enterprise Resource Planning (ERP)/tax

engine/compliance approach

► There is no “one-size-fits-all” approach ► Requirements, considerations and pitfalls (IT/supply

chain/finance/tax)

► How to build a business case for your global indirect tax approaches? ► Identifying triggers and making a cost/benefit

assessment

► Closing remarks


Managing global indirect tax obligations for your organization

• Strategic alignment with business

• Help improve value • Alignment with

risk profile• Cash flow and

financial impact

• Risk management

• Audit-ready documentation

• Integrated with compliance

• Binding rulings and voluntary disclosures

Tax life cycle

Internal influences

• Integrated global process

• Accurate, supportable tax accounts

• Tools and technology

• End-to-endreporting

Strategy

Enterprise

Governance

Regulatory

Economic

Industry

External influences

• Leverage provision data• Consistent

global process • Timely visibility and

status reporting• Real-time submission of

transaction data


The roadmap to a leading indirect tax approach

Leading

Advanced

Basic Data analysis/controls

Procedural guidance

Work flow management

Documented processes Formalized Indirect Tax (ITX) function with global responsibility

Indirect tax automation

Continuous control monitoring


A simplified version of the indirect tax landscape within any organization

Record Gather and analyze Report

ERP

Expensesystem

OtherShared Services Center (SSC)

Excelor CSV

Datawarehouse

VATreturns

Intrastat

VIES*

Exceptionreporting

Compliancesoftware

Work-papers

Workflow and information management

eFiling

XBRL

Retentionandarchiving

Market units

*VAT Information Exchange System


Overview of dedicated indirect tax technology approachesVendor /Product Use Tax Sales Tax VAT/GST Telecom Reports Filing Hosted Onsite

Vertex / O-Series (CommTax)

Thomson Reuters / ONESOURCE

Taxware / Taxware Enterprise

TaxJar / Smart Tax

StrikeIron / Sales Tax Calculation

Exactor / ExactOCalc

CCH / Sales Tax Office (Suretax)

BillSoft / EZTax

Avalara / Avatax

Tax Support Software DeliveryCompliance

Excellent Satisfactory N/APoorGood


Choosing the appropriate indirect tax approach for your company

► Choosing the right technology approach is a delicate and complicated process; there is no “one size fits all” or “plug and play” approach.

► Some important questions to answer prior to selecting a technology approach are: ► Does the approach accommodate tax determination in all my key jurisdictions? ► What reporting functionality does my organization need and does the technology

approach I am interested in accommodate this need in all my jurisdictions? ► Is the approach I am looking at compatible with my existing ERP environment?

What will be the level of configuration/customization? ► Can the chosen approach handle my supply chain structure? ► What does the price tag look like (initial fee, configuration fee, license/usage fee and

maintenance fee)? ► What is the level of support a vendor gives me in case of troubleshooting, legislative

updates, and irregular maintenance?


Key considerations for success

1. The day-to-day decisions for transaction tax determination are primarily automated and driven by technology: ► Tax determination for AR and AP transactions ► Tax invoicing (including e-Invoicing) ► Automated intercompany settlements and billing, including AP postings ► Cross-border stock replenishments

2. Manual intervention in the reporting process is kept to a minimum, with technology used to detect and control compliance failures: ► “Drill down” reporting; trend analysis, exception reports, audit reports ► e-Filing and e-Storage ► Workflow management

3. Approach is scalable, sustainable and transparent.

4. A successful implementation considers the organizational/change management risks: ► Participation of the business units in the chosen approach ► Regional/local process owners ► Early appointment of super-users in order to involve them in the early stages of the

implementation/configuration


Pitfalls when implementing a global indirect tax approach

VAT risk

Lack of clarity in VAT G/L account set-up

Unclear tax code descriptions and duplication

Missing master data

Tax codes not set up for reverse charge

Lack of control around tax-critical master data

Incorrect population of VAT treatment rules

Missing transactional data on invoices

Incorrect rates and G/L accounts set against tax codes

Potential risks in a global VAT automation are:

► Changes in business models and transactional flows

► Lack of integration between tax and IT functions

► Loss of configuration knowledge over time, mainly due to staff changes

► Changes in local VAT legislation

► Inconsistencies in approach due to the creation of local workarounds and system “fixes”


So, how can I build a business case for a global indirect tax approach?

► Look at organizational “life events”: Global business transformation is the driver for the indirect tax business case!

► US multi-nationals increasingly focus on centralization and standardization of their business processes ► Finance transformation ► Centralization of functions – SSCs ► Supply chain transformation ► Business integration or separation

(mergers, acquisitions and divestments) ► ERP activity – new implementations or

upgrades


Other contributors to your business case…

► There is a trend of US multi-nationals introducing central management of indirect taxes to their organizations. ► Keeping global indirect tax responsibility within finance, but imposing

central oversight ► Making global indirect taxes an ultimate responsibility of the (corporate)

tax department ► Establishing a global indirect tax director position

► Changing indirect tax landscape ► Increasing indirect tax burden globally ► Increased reliance of companies and tax authorities on technology and

automation for indirect tax compliance ► Increased focus on tax payers having proper processes in place to be

“in control” of indirect tax ► Increased number of audits and the quality of these audits


How to approach building a business case for a global indirect tax technology approach?

Main phases

Key activities

Current state assessment

► Existing ERP landscape and support systems ► Key Order to Cash (OTC), Procure to Pay (PTP), supply chain and logistics processes ► Key indirect tax requirements (tax determination and tax reporting) ► Data structure ► Existing roadmap for updates/upgrades ► Sustainability of current approach ► Known improvement needs

Approach requirements assessment

► Assess ability for approach to integrate with current systems ► Compare requirements with approaches functionality ► Data element requirements ► Develop/map implementation scenarios ► High level design ► Operating model needed to support approach

Implementation impact assessment

► Overall complexity of implementation ► Process change requirements ► System change requirements ► People change requirements ► Consideration of system upgrades/updates ► Implementation strategy ► Approach long-term sustainability

Cost/benefit assessment

► Cost of maintaining current state approach ► Cost of potential new approach (hardware, software, people (internal/external)) ► Cost of potential new approach (maintenance, operating cost) ► Benefits of potential new approaches ► Overall recommendation


Closing remarks

► US multi-nationals have become very aware of their need to manage indirect taxes globally, but…

► US multi-nationals are also mostly not enabled to appropriately manage indirect tax on a global scale.

► Use change within your organization to build your business case.

► Global business transformation is the driver for the indirect tax business case!


Circular 230 disclaimer

This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does not provide tax advice to any taxpayer because it does not take into account any specific taxpayer’s facts and circumstances. These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice.


Disclaimer

► EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the U.S.

► This presentation is © 2014 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of U.S. and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party.

► Views expressed in this presentation are those of the speakers and are not necessarily those of Ernst & Young LLP.

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