the winning tax transformation trinity - eyfile/ey-the-winning-tax-transformation-trinity.pdf ·...

The winning tax transformation trinity Data, technology and operations

Moderators

Daryl Blakeway Anthony Davis

Director South Africa Tax Performance Advisory

Executive Director EMEIA Tax Performance Advisory

Panel

Africa Tax Conference™ 2015

EY Global Tax Performance Advisory Practice We help companies improve end-to-end business processes that drive tax performance

Our approach allows us to speak the language of your tax, finance, IT and business professionals, which is necessary to drive enhanced tax function performance

Aligned strategy, operating model and

metrics

Effective and controlled

processes

Efficiencies through

automation

Value and quality of tax

data in financial systems

Enable change

► Income tax

► Indirect tax

► Transfer pricing

► Statutory reporting


► Key findings from EY’s 2014-2015 Tax Risk and Controversy Survey Series provide insight into the concerns of the CFO and Tax Directors of top global organisation

► Four types of risks faced by tax and finance executives:

► Legislative ► Reputational ► Enforcement ► Operational

► Operational tax risks arise from people, process

and technology

► To mitigate them, companies should have clearly defined strategies in respect of all three elements

Global tax risk and controversy surveys



Global tax risk and controversy surveys (cont.)

of the largest companies having an opinion on the matter think that global disclosure and transparency requirements will continue to grow in the next two years.

94% Legislative Risk

of the largest companies surveyed are somewhat or significantly concerned about the media coverage of the taxes some companies are paying or their seemingly low effective tax rates. This is up from 60% in 2011. Conversely, just 9% say they are unconcerned now, compared to 40% in 2011.

89%

Enforcement Risks Operational Risk

Reputational Risk

75% cited insufficient resources to cover tax function activities

57% cited lack of processes or technology

45 % of large companies globally have “complete visibility” over open tax audits and disputes globally

of the largest companies report that they feel tax audits have become more frequent or aggressive in the last two years.

68%

Source: EY’s 2014-2015 Tax Risk and Controversy Survey Series

Change management and continuous improvement

Tax transformation

Tax Technology Strategy

Implement right and

early

Implement right and

early

Implement right and

early Resource efficiency

and processes

effectiveness

Quality, integrity and accessibility

of data

Enablement to maximize effectiveness of operations

and data

Operations

Tax strategy and policy

Technology Data

Opportunities Update and align group tax

strategy and policy to respond better to internal and external

pressures

Position tax as a true business partner

Redesign and enhance your existing processes to bring

further efficiencies and improved performance

Improve data quality and drive automation through tax

sensitization

Embed and enhance internal controls to reduce risks

Enable and implement technology for tax

Challenges Lack of clear tax transformation

vision and strategy, and prioritized focus areas

Upfront dedicated tax resources and proper understanding of

business transformation initiatives

Effective change management and communication

Secure “a seat at the table” and establish tax executive governance

group

Clear and up-to-date mapping of existing tax processes – who,

where and how

Implementation of flexible and scalable solutions, not just a

technology

Tax transformation challenges and opportunities



Identify risks, value and savings opportunities

Risk Mitigation

► Reduced exposure to deficiencies, misstatements, executive liability,

reduction in audit cycle, etc. ► This is typically viewed as an intrinsic value not represented by monetary

valuation

Tax Value

► Value realised by increased or accelerated deductions, increased tax credits

and incentives, reduced penalties, interest driven by enhanced business data quality and sustaining existing tax position through audit by access to quality data

Efficiency Dividend

► Value realised through tax or business process efficiencies driven by improved data quality and accessibility of data

► Better leverage of resources focusing on higher value tax activities and business support

Tax transformation

Leadership and executive

commitment

Change management

strategy

Plan and effectively

manage partners and vendors

Tax Transformation

Steering Committee

Honest assessment of

costs, time frames and resources

needs

Business, tax and technology infrastructure

alignment

Road map and prioritization of

tax transformation initiatives

Tax transformation critical success factors


Global tax risk and controversy surveys


Source: EY’s 2014-2015 Tax Risk and Controversy Survey Series

To what extent are tax processes and operating procedures formalised and standardised across your organisation?


When? Prior to designing and implementing future-state processes and technology as part of a phased approach to transforming their tax function to:

► Identify requirements and objectives

► Align with wider business strategy and vision

► Identify and prioritize key focus areas

Performance measurement Policy Process

Technology Data People

Organisation

How? Benchmark current tax operations against leading practice and global market trends to: ► Identify current gaps and challenges to

be consolidated and prioritized into the tax transformation roadmap

► Enable integration to the wider business transformation initiative

Transformation readiness

Why? Increasing pressure on tax functions driven mainly by:

► External legislative/ regulatory changes

► Increased internal reporting needs ► Higher efficiencies and improved

performance pressures ► Wider business/ finance

transformations



Optimise investments and costs associated with Tax function

Drive business strategy by quantifying your Tax function

Understand Quantify Compare

► Conduct survey to understand where and how much time employees are spending on specific Tax activities

► Using survey results and company data, leverage EY’s American Productivity Quality Center (APQC)* to calculate cost associated with survey results

► Compare results across industries, processes, and revenue sizes using APQC benchmarks

*APQC (American Productivity & Quality Center) is one of the world’s leading proponents of global business benchmarking, best practices, and knowledge management research for over 30 years. It encompasses one of the world’s largest databases of benchmarks and best practices, with focuses on Financial Management, Human Capital Management, Knowledge Management, Supply Chain Management, All-Inclusive, and Professional Services.

What information and data do we need to have readily available and how do we present it?


Less time spend managing data

Tax-sensitised environment

More time spend managing data

Non-tax sensitised environment

Due to the ever-growing transparency demands on tax, the data needs of the tax function are required to be integrated into the underlying business process and finance systems that generate the information.

Data should ultimately be viewed as an “asset” that drives control, value and efficiency to support the operations of tax and the organisation as a whole.

After data quality review

Ever-changing tax landscape

Regulatory reporting

requirements

Efficiency pressures

Increased volume of tax relevant data

Higher global profile of tax

Increasing internal and management

reporting

Importance of data readiness for tax and transparency


Finance Functions

Tax Function Business U

nits

Data Flows

Business U

nitsB

usiness Units

Business U

nits

Typical data flow scenario – no integrated tax requirements

• 71% of enterprises have more than 1 ERP systems for financial information

• Only 12% of tax functions report being “integrated” with the enterprise’s ERP system(s)

• MAPI 2011

Tax function Business units

Finance functions

Target state after embedding tax-aligned requirements

Data Flows

MAPI 2011

Financial consolidation

Tax data needs

ERP system

ERP data needed for tax deliverables

ACC PLM SCM

HR SRM CRM ► Virtually every business flow and transaction carries a

tax implication, making tax one of the largest consumers of data in the company.

► Approximately 80% of the data needed to support the production of tax deliverables can be derived from either an ERP or a financial consolidation system.

► Value from the tax function comes from having sufficient time and quality of information to identify tax planning opportunities.

Why is big data critical the way the tax function operates?


Does your company have an organisation-wide tax technology vision/ strategy/ roadmap?


Developing a tax technology roadmap

Business / functional goals that the technology should enable

Possible and practical technology choices

Process and other changes that need to be in place for the technology to be

successful

Business case for enabling change

► A clearly defined roadmap for tax outlines how to best leverage existing investments in infrastructure and identifying technology alternatives to meet tax objectives

► This should maintain a focus on short and mid term data and technology initiatives to align tax and the broader organisation goals and objectives

Outcomes and objectives

Costs ► Resources ► Funding

Benefits ► Value ► Risk mitigation ► Efficiency

Current State Assessment

Strategy and Roadmap


Workflow Visibility of compliance status

and tracking of compliance activity completion

Data quality Access to appropriate and

accurate data for tax reporting and analysis

ERP sensitization Tax-sensitised COA and embedded tax controls in

financial processes

Tax determination Fully automated indirect tax decisions; use of native ERP

or tax engine

Data analysis Data analysis capability for exception reporting, error detection and data query

Compliance and reporting Dedicated solutions to streamline data collection, consolidate and

prepare returns

Information storage Tax data warehouse; tax

information and document repository

Source & Repository

Business Intelligence

Management reporting Dashboard and management

reporting to enhance governance and KPI measurement

What do we mean by tax technology?


Enhancements to

existing technology

Development of new technology

solutions

Focus on control and integrity of

data Additional functionality and features built onto existing products to meet changing

tax demands

New products developed to drive further automation and

efficiencies

Effort made to improve the quality and integrity of data and developments made to analyze and visualize data

► Additional compliance functionalities, i.e. e-Filing, XBRL, etc.

► Increased automations through integration with other systems

► Enhancing ad hoc and flexible reportingg, e.g. CbC reporting

► Workflow and governance tools

► Automated tax determination and reporting

► Looking beyond tax – statutory accounts automation

► Drill-through to source data – tax data marts

► Data analytics – exception reporting and “what if?” scenarios

► Business Intelligence – dashboards and mobile visualisation

Tax technology in the ever challenging environment


Record Gather and analyze Report

ERP

Expense system

Other SSC

Excel or CSV

Data warehouse

CT returns

VAT returns

Other

Exception reporting

Compliance software

Work papers

Process and controls

eFiling

XBRL

Market units

3. Tax sensitization

2. Tax determination

4. Tax data analytics automation

6. Tax governance and control

5. Tax reporting

Tax engine

Retention and archiving

CbCR reports

1. D

ata

qua

lity

initi

ativ

e

Tax data and technology initiatives

Challenges ► Non-integrated calculation, storage and reporting processes ► Reliance on Excel and manual intervention increases error risk ► ERP system(s) not sensitised, resulting in determination errors ► Tight financial close cycle and often late changes ► Tight resourcing, with majority of time spent on data gathering or

manipulation to get into a useable form ► Limited error detection and exception reporting ► Limited audit trail, visibility and transparency

Value delivered ► Deliver a timely financial and tax close process by

standardising and automating processes ► Enable flexible and scalable reporting for management

purposes as well as data analysis, planning and forecasting ► Enhance the ability and effectiveness of transitioning

commodity tasks into shared service centres ► Free up resources to focus on value-add activities ► Accurate transactional tax decisions


Wrap up - Putting all the pieces together

Questions?


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. © 2015 EYGM Limited. All Rights Reserved. EYG no. DL1399 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

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