Tax teams in Multinational Groups are facing increasing challenges when it comes to data collection and management. At Wolters Kluwer, we understand the critical importance of tackling these hurdles head-on. Our aim is to equip you with invaluable insights gleaned from internal discussions and client interactions, empowering you to seamlessly navigate the complexities of data management. Delve into practical solutions and expert advice to enhance your tax team’s efficiency and effectiveness, including the top three questions to identify tax data sources.
The changing international tax landscape
The global tax landscape is continuously evolving, and tax teams must adapt to new challenges. From BEPS Pillar Two, to Country-by-Country data, tax teams face multiple priorities. The modern tax function must be agile, forward-thinking, and capable of integrating new tax obligations into their processes swiftly and accurately.
Data collection issues for tax teams
Data collection poses significant challenges for tax teams. BEPS Pillar Two isn’t the only issue tax teams are facing, but it is one that comes to mind given recent developments and the onerous requirements it will place on the tax function. However, there are also other complex regulatory regimes that need to be complied with. Controlled Foreign Company rules, transfer pricing rules, passive income rules, to name a few. These require extensive data sourcing, both financial and otherwise.
Additionally, financial data may need different levels of granularity for tax disclosures, which further adds to the complexity and challenges that the tax function will face – as a largely “business as usual” task.
To overcome these issues, tax teams need to ensure the data they use for tax is up-to-date, accurate, and relevant for tax analysis. However, rapidly changing tax requirements can leave software solutions trailing, meaning constant adaptations.
Understanding data sources for tax
Tax teams must be familiar with the various data sources required for tax compliance. These sources include data generated by the business, such as sale or accounts payable transaction detail needed for indirect tax returns, or employee remuneration and pensions information used in corporate income tax return calculations. In addition to this there is data collated or generated by tax teams themselves, such as withholding taxes, tax payable and taxes paid.
To address this challenge, tax teams should categorise data sources and establish effective mechanisms for collecting, updating, and housing the data.
How should you go about identifying these sources? Below are a few questions we think you should be asking yourself to help with this process.
Top three questions to identify tax data sources
- What tax obligations do you have? Listing these can help you visualise which obligations have similar data sources, whether the sources tend to be owned within tax or not.
- Who are the stakeholders involved in tax compliance? Finance teams, legal departments, tax teams, and data owners from various business units. Start listing the stakeholders and the types of data they have and whether it is used directly by tax or not.
- How are you collating data currently? You will already be doing a good job in some areas! Look at those areas that are working well and access how you can build on this. Can you expand on the successes to more areas?
People, process, technology: The threefold approach
To tackle the complexities of data collection and management, a threefold approach involving People, Process, and Technology becomes essential. Engaging with data owners within the business, understanding data collection processes, and adopting suitable technology are all vital aspects.
People engagement
Engaging with people outside the tax function, such as finance teams, is crucial for accessing the required data. Proper communication, collaboration, and change management help ensure data owners understand the purpose of data collection and can provide the necessary information. Collaboration also aids in identifying new opportunities for data collection as software continues to evolve.
Utilising a data store and process mapping
To facilitate data collection, using a Data Store can be highly beneficial. Below is an example of how you can collate and collaborate on various tax data points, which will help with the engagement of people within the tax function and outside. This centralised repository acts as a single source of truth for tax analysis. By housing essential information and definitions for different tax regimes, it provides an overview and ensures data accuracy. The Data Store’s ability to capture specific fields required for each tax obligation enhances its versatility. Clients can define data owners, ensure data integrity and foster a structured approach to data management. With the Data Store, tax teams can streamline processes, improve collaboration, and maintain data integrity.
