How to ensure the accuracy and compliance of your indirect tax data
“Once in a while, a country comes up and throws you a curveball,” says Ronan Le Gall, Senior Manager at EY and expert in indirect tax technology at Thomson Reuters Synergy Conference.
– Blog home
partner and principal at EY who leads the indirect tax technology practice for the Americas, and Senior Manager at EY in indirect tax and global VAT end-to-end solution for indirect direct tax processes at the Thomson Reuters Synergy Conference.
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The importance of quality indirect tax data
Data is the lifeblood of any tax function, and its quality is paramount. EY experts stressed that tax professionals are often consumers of data, rather than owners. This can lead to data quality issues such as inconsistent data entry, outdated software, and fragmented process. Vanessa also noted that by the time tax professionals get to month-end processes, “the tax authorities access to the data for a couple of weeks.” Vanessa also noted, that by the time tax professionals get to month-end processes, “the tax authorities
access to the data for a couple of weeks.”[have already had] presents
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considerable challenges, including inconsistencies in customer and vendor data, which can lead to issues in tax determination and reporting. |
The role of e-invoicing in clean data
E-invoicing has emerged as a powerful tool in the fight against global indirect tax challenges. The EY team noted that eInvoicing allows for real-time decisions and compliance. This reduces the need for manual processes. Tim noted that companies were “moving away” from bespoke solutions, and instead having global strategy discussions for their invoicing platform. This global strategy for e-invoicing can lead to standardized processes across jurisdictions, making it easier to manage and comply with diverse regulatory requirements.
Indirect Tax Challenges Infographic
The rise of technology, and the need for upskilling
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Managing data across multiple
presents
considerable
challenges, including inconsistencies in customer and vendor data, which can lead to issues in tax determination and reporting. The benefit of AI in indirect tax data accuracy and complianceTim highlighted the challenges in master data management. Tim highlighted the challenges in master data management. This problem is compounded because users are expected to input and use data correctly, which leads to errors and inconsistencies. AI can predict and categorize issues with data before they become a problem. AI can identify potential issues early and ensure indirect tax data compliance. Tim explained that “from an AI perspective, these things are thought of in buckets. Predicting a value is one, but also looking at the past and suggesting what could come out of analysis.” He gave an example of how AI could be used to analyze purchase order data before they are processed. This would ensure that all master information is correctly used. He suggested that we analyze a purchase order in order to determine if all master data has been used correctly, before any invoices are generated, before posting is done, before tax is determined, and before we have records in the system. This proactive approach can prevent issues before they become problematic.
The potential of real-time AI assistance
Tim’s online shopping analogy:Human action:
You place an online order and put in your address.
AI reaction: “Is this address correct?”
Human reaction:
Option to validate the address.
Apply similar real-time feedback to tax process:
- Human action: You select a tax code.
- AI reaction: “Something looks wrong. I think this code should be used. Please validate the correct code.”
- Human reaction: Option to validate the tax code.
This would significantly improve data accuracy and reduce the need for manual corrections, making the tax process more efficient and reliable.
- Legislative changes and challengesNew tax rules and rate changes mean that data management must be dynamic and adaptable. EY experts discussed tax changes in Brazil
- , as a prime instance of legislative changes affecting tax processes. Ronan addressed the need for e-invoicing and digital reporting, because
- as countries “introduce a new regime and progressively swap out the rates, it essentially means, from a data perspective, you’re going to have to make changes every year for the foreseeable future.”To mitigate the risks of curve ball tax rules, indirect tax teams need to
ensure that tax calculations are accurate, consistent, and compliant with current regulations across all financial transactions in real time or close to real time.Embracing a proactive role in indirect tax data management
Ronan pointed out that the indirect tax department has primarily been seen as consumers of data. With the advent of digital reporting and e-invoicing, tax professionals can now make tax decisions and submit tax positions in real-time. This new complexity requires that tax departments are deeply involved in data creation and management, especially when new products or mergers and acquisitions are launched.
–The integration between the tax department and other departments, particularly IT, is crucial to ensure indirect tax data compliance and quality from the beginning. We saw how the pandemic forced companies to adapt quickly or face severe consequences. As we navigate economic and business uncertainties, including tariffs, tax reforms, as well as the increasing pace of the economy, the challenges will continue to evolve. The insights provided by EY at the Thomson Reuters Synergy Conference offer a clear way forward for organizations that want to enhance their indirect taxes processes and stay on top of an ever-changing regulatory landscape.
