digital tax administration are you ready? - ey.com · page 7 ey domestic tax conference who should...

Digital tax administration –are you ready?

EY Domestic Tax Conference

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 US.

This presentation is © 2018 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 US 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 do not necessarily represent the views of

Ernst & Young LLP.

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.


Greg Petolick

Executive Director, Digital Tax Administration Services, Ernst & Young LLP

Adam Broda

Executive Director, Digital Tax Administration Services, Ernst & Young LLP

Marita Fegley

Director, Brand, Marketing & Communication Services, Ernst & Young LLP

Today’s presenters

Andy Steigleder Principal - Leader, Central Region Tax Policy and Controversy, Ernst & Young LLP


The forces driving our future: megatrends

Age of discovery colonialism

Bretton Woods trade liberalization

East Asian NICs China/India/Brazil

Latin America/Africa

Industrial revolution information technology

Mainframes PCs Online (web)

Social mobile smart IoT

Virtual reality AI robotics

Demographics is destiny Post-WWII “baby boom”

China “one child” policy millennial

Workforce urbanization aging West

Global migration young India/Africa

3Three primary forces:

► Independent variables

► Long-term, multiple waves

► Interact and catalyze each other

Demographics

Technology

Globalization

… are driving multiple megatrends► Cohesive narratives with significant interplay

► Driven by interaction between the next waves of

technology, globalization and demographics

1. Industry redefinedIs every industry now your

industry?

2. The future of smartWhat intelligence will we need

to create a smart future?

3. The future of workWhen machines become

workers, what is the human

role?

4. Behavioral revolutionHow will individual behavior

impact our collective future?

5. Empowered

customerHow will you change buyers

into stakeholders?

6. Urban worldIn a fast-changing world, can

cities be built with long-term

perspective?

7. Health reimaginedWith growing health needs,

is digital the best medicine?

8. Resourceful planetCan innovation make the planet

resource rich instead of

resource scarce?


Five

disrupters

of tax

Changingbusiness

model

Machinelearning

Taxpolicy

The futureof work

Digitalgovernment


Tax authorities:

► Have invested in big data platforms to synthesize data submissions

► Have built analytics and logic to enhance compliance and limit fraud

► Are sharing and obtaining information:

► Intra-agency (between different tax types)

► Inter-country (between revenue authorities)

► Within the supply chain (between vendors and suppliers)

► Increase in tax revenue without

increase in rate: 38%

► Average increase in audit

assessment value: 76%

Mexico

Source: FTA Advanced Analytic Survey, 2015

Worldwide

16Tax administrations now using

advanced analytics (such as

predictive models) to reduce

value-added tax (VAT) fraud and

increase compliance

► Increase over plan for 2017 audit

and penalties collected: 42.5%

Source: http://idg.receita.fazenda.gov.br/orientacao/tributaria/auditoria-fiscal

Brazil

Source:

http://finanzaspublicas.hacienda.gob.mx/es/Finanzas_

Publicas/Estadisticas_Oportunas_de_Finanzas_Publicas Source: FTA Advanced Analytic Survey, 2015

What is digital tax administration?Tax authorities are changing the traditional compliance model

http://idg.receita.fazenda.gov.br/orientacao/tributaria/auditoria-fiscal


Digital disruption of complianceThe shift in focus from returns to data

The traditional compliance model

Request

data from

accounting

Analyze/prepare/fix data

Calculate adjustments

Submit return

TaxTax

Prepare form

Tax

Extract data directly

from source systems

Cycle time = n + 3 years

The digital compliance model

Submit data

directly to

government

IT

Tax

ERP

1000110001

001001001

001IT

Wait

for

audit

Tax

E-audit /

E-assess/

E-match

$$$$$$

$$$$$$$$$

Gov’t

Respond to

assessments/

audits

Tax

Cycle time = n + 90 days

Digital disruption

Unprecedented volume of

information and data being

submitted directly to the

government (B2G reporting)

Tax not involved until audit

Cycle time from transaction to

audit drastically compressed


Who should care about digital tax administration?

IT Finance Tax

► Unexpected data mining and mapping projects

due to new data requirements mandate

► Causing unplanned impacts to IT’s project

road map, resources and budget

► Increased responsibilities over the global data

submission process

► Creating risks of penalties, delayed cash flow

and financial reporting errors if mismanaged

► Increased scrutiny from tax authorities with

reduced audit cycles

► Triggering increased scrutiny with limited

insight into the data submitted

Internal stakeholders affected by digital tax administration:

► Tax has ultimate responsibility for managing the increased risk from additional governmental scrutiny.

► However, the IT and finance functions also play a key role for verifying compliance and mitigating risk.


Current state of digital tax administration


`

Level 1 – E-file Level 2 – E-accounting Level 3 – E-match Level 4 – E-auditDigitization level Level 5 – E-assess

Today’s state of digital tax administration* …

LATAM

► Pioneer in digital tax

administration

► Focus on e-invoicing and

transactional-level

accounting data

► Primary objective to raise

tax revenue by detecting

fraud and tax evasion

Europe

► Growing number of

countries have adopted

OECD’s SAF-T guidance.

► Guidance includes

detailed invoice and

accounting data.

► Other countries have

adopted their own

variations of digital data

reporting requirements.

Asia-Pacific

► India requires reporting

of detailed invoice data.

► China introduced data

reporting through its

1,000 accounts plan for

select large taxpayers.

► Other countries are in

process of adopting

digital reporting –

initiatives vary by

country.

China

Mexico

Brazil

India

Argentina

Chile

Russia

TurkeySpain Italy

France

Germany Poland

Portugal Greece

Austria

* Current as of April 1, 2018

This map is representative and not all inclusive of countries with digital requirements.


… and where is it going?Upcoming changes* to digital tax megatrends

2019 20202018

2018

► Brazil is introducing new obligations for payroll –

(eSocial) and EFD-REINF.

► Hungary will require “live” invoice reporting

starting July 1, 2018.

► Russia plans to introduce country-by-country

(CbC) reporting in 2018.

► Mexico has announced its intent to increase use

of e-assessments in 2018.

2020

► UK’s HMRC plans to introduce MTD for other

taxes besides VAT in 2020.

► Australia is in discussion to further digitize its tax

administration under its “Reinventing the ATO”

initiative.

► New Zealand is undergoing a tax modernization

program focused on technology processes, policy

and the training of people.

► Norway’s SAF-T requirements will become

mandatory on January 1, 2020 for submission

upon request.

* Current as of April 1, 2018

This list is representative and not all inclusive of upcoming changes.

2019

► UK’s HMRC is implementing Make Tax

Digital (MTD) for VAT in April 2019.

► Italy is introducing live invoicing

requirements in January 2019.

► Ireland is introducing real-time payroll tax

reporting requirement in 2019.

► Colombia is adding e-invoicing and

e-accounting requirements.

► Malaysia is set to use analytics to prioritize

audits.

► Hungary is increasing e-audits/assessments

from “live” invoicing feeds.


What are we hearing in the US?

► Federal expects no significant

developments in the next three to

five years.

► Some state authorities have

expressed interest in what countries

are doing.

► States and localities initial focus:

► Sales and use tax

► Property tax

► Excise tax


How are companies being impacted?


What we’ve heard from our clients Four key themes

Support and skill

sets

► How do we help the other

functions understand the

impact that these

changes are having?

► What will the tax and IT

resources that support tax

look like in the future?


Digital tax

administration

reporting

Creating a sustainable processGoing from reacting to responding to being proactive

Current stateOverwhelmed by reporting

Leading practiceReporting under control

Tax► Provide governance and

oversight

► Perform tax technical review

► Manage global tax risks

► Respond to notices and audits

IT► Determine

data gaps and

remediate

► Deploy data

management

strategy

Digital tax

administration

reporting

Finance► Provide digital

submission

compliance


Responding to the environment


Our approach

Readiness review

Data enablement

Monitor and inform

Data as a service

Audit and defense

► Assessment report: Review of current data

submission process and global operating model

with improvement recommendations

EY services

► Project based: Enablement of source

systems for digital tax administration

► Monitoring portal: Service providing latest

upcoming changes, testing/analytics, penalties

and tax authority enforcement trends

► Managed service: Manage your company’s

submissions by transforming, analyzing and

transmitting, and responding to information

requests

► Ad hoc consultation: On-demand services

for audit requests and defense of digital

submissions

Manage, analyze

and submit data

Digital tax administration life cycle

Review for readiness for

digital reporting

Defend in

digital

audits

Manage, analyze

and submit data

Remediate

identified

challenges

and risksGlobal

dashboard


Governments are becoming more and more savvy in their use of technology, big data and analytics

… are you ready?


Q&A


#EYDTC

Thank you!

EY | Assurance | Tax | Transactions | Advisory

About EY

EY is a global leader in assurance, tax, transaction and advisory

services. The insights and quality services we deliver help build trust

and confidence in the capital markets and in economies the world

over. We develop outstanding leaders who team to deliver on our

promises to all of our stakeholders. In so doing, we play a critical role

in building a better working world for our people, for our clients and

for our communities.

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

Global Limited, a UK company limited by guarantee, does not

provide services to clients. For more information about our

organization, please visit ey.com.

Ernst & Young LLP is a client-serving member firm of

Ernst & Young Global Limited operating in the US.

© 2018 Ernst & Young LLP.

All Rights Reserved.

1801-2575548

ED None

This material has been prepared for general informational purposes

only and is not intended to be relied upon as accounting, tax or other

professional advice. Please refer to your advisors for specific advice.

ey.com

digital tax administration are you ready? - ey.com · page 7 ey domestic tax conference who should...

Documents