11th Annual
Domestic Tax
Conference
28 April 2016 | New York City
Enhancing and integrating technology
throughout the tax life cycle
Disclaimer
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This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does not provide tax advice
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These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice.
Page 2
Today’s presenters
Travis Fox
Partner, Ernst & Young LLP – Tax Operations and Systems
Tony Ferrante
Senior Manager, Ernst & Young LLP – Tax Technology and Data Analytics
Alan Williamson
Senior Manager, Ernst & Young LLP – Content Management and Collaboration
Page 3
Agenda
►
Introductions
►
Goals and trends
►
Common tax data challenges
►
Operational controls, access, transparency
►
Data acquisition and proactive insights
►
External drivers
►
Value creation through tax data
►
Tax data maturity models
►
►
Content management and collaboration
►
Business intelligence/data analytics
►
Unified data management
Next steps
Page 4
Tax data goals
►
One version of the truth
►
Maintain data integrity and accuracy
►
Reduce data collection and reconciliation efforts
►
Eliminate manual data manipulation
►
Enhance reporting process and analysis
►
Business intelligence and emerging reporting
… common goals with different solutions
Page 5
Role of data in effective tax operations
“Data are the life blood of decision making and the raw material for accountability.”
The United Nations Secretary-General’s Independent Expert Advisory Group on Data Analytics
►
Tax functions are the heaviest users of enterprise data.
►
Tax processes and enabling technology are built based on the quality of data received
from the enterprise.
►
Tax technical knowledge and creativity has outpaced tax functions’ ability to support the
tax positions largely due to supporting data.
►
The quality and, therefore, the value delivered by tax operations is directly impacted by
the data flowing into tax processes and enabling technology.
►
Tax “owns” no data and has little influence over the systems and processes that
record transactions.
Page 6
Megatrends and their impact to tax operations
Megatrends
Page 7
Tax operations
Globalization
Shift to global tax operating models
Business transformation
Centralization and technology
driving change
Changing requirements
Agile operating model to adapt to
changing landscape
Business alignment
Strong tax data management capabilities
to be responsive and value driver
Tax life cycle and influences
Tax life cycle
External
influences
►
Alignment and
visibility with
business
►
Alignment with
risk profile
►
Sustainable
value
Regulatory
►
Integration of
compliance process
with ERP and bolt-on
solutions
Accurate and
timely reporting
►
►
Economic
►
Industry
Enterprise
►
Easy access
to audit ready
documentation
►
Feedback to
compliance process
Governance
Page 8
Risk
identification
and
management
►
►
Automation tools
and technology
Consistency
throughout the
indirect
function
Visibility and
status reporting
within the tax
function
Internal
influences
Strategy
Enterprise
Governance
Principles of data-driven organizations
►
Data is treated as an asset.
►
►
Data is managed centrally.
►
►
Organizations that understand the value of the data treat it as a true asset. In these
organizations, data are identified and inventoried, classified, assigned value,
maintained for purpose and consumed to realize the identified value.
Data professionals support the enterprise by ensuring that the data is of high quality,
current, and relevant. Just as important, avoiding redundancy and even
discrepancies in the data is only achieved through centralization of the data
management function.
Measurements are based on data.
►
Page 9
The old adage of “you get what you measure” is still true. Both from the top down
and from the bottom up, when the culture measures success and makes decisions
based on data, the organization will achieve the value of being more data-driven.
Summary tax data flow
Enterprise data warehouse
Transactions
Apportionment data
Legal entity remediation
Charts of accounts,
tax sensitization
Legal entity, Charts of accounts
Inter-company
Transfer pricing
Data sourcing
ERP
Consolidation
X – Legal entity rationalization
Tax operations
Tax data flow
Insource/outsource support
Tax systems
System/Ops assessment
Portal/workflow
Managed data/Business intelligence
Workpapers
Governance/Master data management
Page 10
Training
Shared Service
Center/Center Of
Excellence
Tax department challenges
Page 11
Tax department data challenges
Lack of access, control and transparency to operations
►
Difficulty locating and managing final
versions of critical documents
►
Inadequate information-sharing across
tax functions and geographic locations
►
Excess time and effort spent on
administration and manual tracking
►
Redundant and email-intensive data
collection methods
►
Disparate data collection and other
unstructured data
►
Lack of visibility and oversight of
deadlines, deliverable status and
resource allocation
Page 12
Tax department data challenges
Isolated data – difficult to find insights
►
Tax consumes massive amounts of company data
►
Separated by systems and format
Input company data
►
Federal
State
Outputs
Outputs
Indirect
Outputs
International
Outputs
Transfer
Outputs
Custom reporting is limited and finding insights is time intensive
Page 13
Tax
Transfer
pricing
accounting
Pricing
Outputs
Tax department data challenges
Tax authorities are aggressively leveraging data
Government
Companies
Analyze
Finalize
Client data
Government real time data
analytics engine
Government requests
delivered to taxpayers
Statement of
accounts
Customs
declarations
Direct access of
client source data
Vendor invoices
Bank records
Foreign trade
Page 14
Transform to government standard
Invoices
Business rules
Gather
►
Validation of invoices
and discrepancies
►
Sales/purchases
declaration
verifications
►
Tax forms
►
Tax assessments
►
Payroll/withholding
declaration
verifications
►
Audit assessments
►
Comparing data
across jurisdictions
and taxpayers
External driver samples
q
Page 15
External driver sample
Government digital taxation
Tax authorities are
going digital
Page 16
Digital tax is a
paradigm shift
Digital tax means
no more
“business as usual”
Government digital taxation landscape
What: Digital taxation allows tax authorities to collect detailed data in real time
►
Unprecedented data availability to governments
►
Enables new government data testing driving eAudits
►
Taxpayer information is cross-referenced and possibly shared among
governments and agencies
How: Tax authorities are building sophisticated tax data-gathering and
analytics platforms
Where: Latin America: Brazil, Mexico and beyond
Why: Revenue pressures for increased collections, reduced fraud, improved tax
authority performance
Page 17
Tax authorities
The move to digital
Level 3
Level 4
Level 5
“E-file”
“E-accounting”
“E-match”
“E-audit”
“E-assess”
Corporate entities
required or have the
option to use a
standardized electronic
form for filing tax
returns.
Other income data
(e.g., payroll, financial)
filed electronically and
matched annually.
Corporate entities
required to submit
accounting or other
source data to support
filings (invoices, trial
balances, etc.) in a
defined electronic
format at a defined
frequency. Additions
and changes at this
level occur frequently.
Corporate entities
required to submit
additional accounting
and source data,
government accesses
additional data (bank
statements).
Government begins to
match data across tax
types, potentially
across taxpayers and
jurisdictions in real
time.
Corporate entities’ L2
data is analyzed by
government entities
and cross-checked to
filings in real time to
prevent fraud,
unintended errors, and
to map the geographic
economic ecosystem.
Governments send
taxpayers electronic
audit assessments with
limited window to
respond.
Government entities
use submitted data
from corporate entities
to assess tax without
the need for tax forms.
Taxpayers have limited
window of time to audit
government-calculated
tax.
Disruptive
Level 2
Paradigm shift
Level 1
Note that not all governments collect the same information or treat it the same under this model. For example, a country might be at Level 1 for
certain data, but at Level 3 for other data.
Further, the move to digitization is not necessarily linear, nor should higher levels of digitization be viewed as the ultimate goal of either taxpayers
or .tax authorities. The graphic is merely intended to provide an easy-to-digest overview of the vast spectrum of digitization efforts.
Page 18
External driver sample
Action 13: Country-by-country (CbC) reporting
►
What it is: High-level information about Multinational Corporation’s (MNC) jurisdictional
allocation of revenue, profit, taxes, assets and employees to be shared with all tax
authorities where MNC has operations; purpose is to provide greater transparency
►
Who is affected: Multinational groups with consolidated revenue of €750m or more
►
When it becomes effective: Fiscal years beginning on or after 1 January 2016, with
first CbC reports to be filed, at most, one year from fiscal year-end
►
Where companies will have to file: Filing with tax authority in parent country, to be
shared with tax authorities in countries where group has entities or branches
►
How reporting will be managed: Information on revenue, profit, tax (cash and
accrued), stated capital, accumulated earnings, tangible assets and employees
provided on a CbC aggregated basis
►
Other considerations: CbC report needs to be consistent with master and local files
Page 19
Sample CbC reporting template
Table 1 and Table 2
3. Prepare for and
conduct year
one reporting
2. Assess risks and
opportunities
1. Getting started
4. Sustain future
compliance
Table 1:
Revenues
Tax
jurisdiction
1.
Unrelated
party
Related
party
Total
Profit (loss)
before
income tax
Income tax
paid (on cash
basis)
Current year
tax accrual
Stated
capital
Accumulated
earnings
Tangible assets
other than cash
and cash
equivalents
Number of
employees
P&L, BS and cash flow or TB data from consolidation system or ERP
2.
Tax provisions
HR
3.
4.
Local financial statements/local financial controllers
5.
Transactional details from ERP systems
Table 2:
ERP consolidation system
Tax department/Cosec records Some groups will not have an identifiable source for business activities
Tax returns
Page 20
Local financial statements
Other
Dormant
Holding shares
or other equity
instruments
Insurance
Regulated
financial
services
Internal group
finance
Provision of
services to
unrelated parties
Admin, mgmt, or
support services
Sales, marketing
or distribution
Mfg or
production
Purchasing or
procurement
Tax jurisdiction of
organization or
incorporation if
different from tax
jurisdiction of
residence
Holding or
managing IP
Tax
jurisdiction
Constituent
entities
resident in
the tax
jurisdiction
R&D
Main business activity(ies)
Prepare for and conduct year one reporting
Options for data gathering and technology tools
1. Getting started
2. Assess risks and
opportunities
Key decision point
Typical profile
Page 21
3. Prepare for and
conduct year
one reporting
4. Sustain future
compliance
Insource/internally manage or
co-source?
►
Insources home country and/or
global compliance
►
►
Large and complex
►
►
Mid-market with low complexity
►
Co-sources home country and/or
global compliance
Mid-market with mid to high complexity
Limited IT support to develop an
insource solution
Value creation through tax data
Page 22
Tax value in the new era of digital taxation
►
Tax is generally a high performing team in spite of limitations around data and
technology, but is often constrained in its potential to define or create value.
►
Tax can often deliver the largest component of the value proposition in
enterprise initiatives and transformations.
►
The value is primarily derived from risk mitigation (rate protection) and tax
planning (enhanced opportunities); while there are efficiencies to the
integration, this is often the smallest component.
►
External factors, such as tax audits, are becoming far more data centric and
can increase exposure if process and data is not efficient and clean.
►
Effective tax technology can deliver sustainable value and efficiencies to carry
tax departments into the new era of digital taxation.
Page 23
Tax value through effective data management
Financial reporting
► Accuracy of tax reporting
► Timeliness of tax close
► SOX and regulatory compliance
Audit and compliance
► Optimized data and technology
► Sustain value of current tax positions
► Documentation to support audits
Operational
► Tax enabled enterprise environment
► Efficiency of solutions to manage
data and process
► Effectiveness of resources spent on
value-added work
Page 24
Enterprise
value from
Tax
Strategic
► Protect effective tax rate
► Cash management and tax
attributes optimization
► Avoid double taxation
Tax data maturity models
Page 25
Defining tax data reporting and analytics
Data analytics often describes
many different activities…
Respond
to audits
Monitor risks
Analyze
accounts
Load tax
process software
Page 26
Track tax
positions
Review
transactions
Prescriptive
intelligence
Tax-influenced
business decisions
Discover business
trends
Monitor transfer pricing
Prepare workpapers
Tax big data management is
scalable, supports the entire
tax function and facilitates
business decisions.
Data insights – value across the tax life cycle
Transactional analytics
Tax reporting
►
AP/AR transactional analysis
►
Tax coding and posting error
detection
►
Control checks and tests
►
One-off or embedded solution
►
►
IDEA preparation
Implementation of new
reporting solution
Targeted analytics
►
Enhancements to existing tax
return spreadsheets
Supply chain analysis
Risk analysis and monitoring
►
Risk analysis and heat maps
►
Transaction profile trend
monitoring
Transfer pricing analytics
►
Pricing and margin modelling
for new indirect taxes
►
Supply chain mapping using
transactional line level data
►
Analysis to ensure consistent
execution of policies
►
Transactional keyword
analysis
►
Analysis of actual tax
treatment against expected
►
►
Tax coding logic review
Cost plus pricing, resale price
and gross margin method
analysis
►
Transactional analysis
Page 27
Tax department performance maturity
Basic
Established
Leading
Capability
Unified data
management and
predictive models
Business
intelligence/data
analytics
Content
management and
collaboration (CMC)
Maturity
Page 28
Tax performance maturity examples
Page 29
Content management and collaboration
Tax portals continue to be an integral part of an
effective tax operations model. When deployed
properly, portals allow Tax to gain efficiencies by
mechanizing processes and centralizing document
management across various tax functions.
With all of the controls, processes, and procedures
surrounding the entire tax life cycle, tax departments
are ideal candidates for tax portals as a solution to:
►
Advance overall organizational efficiency
►
Increase information-sharing across tax functions
►
Manage tax documents and processes within a
secure and centralized application
Page 30
Organizational
efficiency
Informationsharing
Centralization of tax
documents and
processes
Standard CMC model
Global Tax Operations Portal (GTOP)
►
Web-based portal comprised of tax process
applications developed on SharePoint to
manage and streamline tax operations
►
Provides a single platform to share
information and connect cross-functional tax
operations and services
Centralized document management
Process automation and workflow
Dash-boarding and business analytics
What is it?
What does
it do?
►
►
►
►
What are the
benefits?
►
►
►
Rapid deployment
Web-based access, transparency,
automation
Reduce manual processes
Enhanced operational controls
►
Common
Portal
Apps
►
►
►
►
Page 31
Foundation
Compliance Manager
Notice Tracker
Audit Manager
Data Collection
Sample tax portal structure
- Policies
- Retention Task
Tracking
- Document
management
- Global management and
shared information
- Full search
- Training and Templates
- Resource management
- Budget tracking
- Dashboards and Metrics
Income
Tax
Compliance
- Document
management
- Process &
workflow
- Metric
tracking tools
- Shared
resources
- Resource
scheduling
- R&D survey
conversion
Page 32
Tax
Top-Level Site
General
Top-level Functions
Archiving
Audit
- Enhanced
document
management Audit
management
process &
workflow
- Audit &
Information
Data Request
tracking
- Prior year
Information
Data Request
search
- Standard
processes and
automation
- Enhanced
document
management &
file sharing
R&P
- Published &
Working
documents
- Process &
workflow
- Search
- Document
management Process &
workflow
- Planning
opportunities
Tax Portal
Enhancements Tracking
Utility
- Governance Protocols
- Access and security
- Site maintenance and Q&A
- Documentation
- Training
- Knowledge Transfer
- Self-sufficient support
Tax
Accounting
Fixed
Assets
Tax Technology
(Centralize design,
support ALL Tax
functions)
- Enhanced
document
management
& file sharingProcess &
workflow
- Cash taxes
& budget
tracking
Property
Tax
- Standard
processes
and
automation
- Enhanced
document
management
& file sharing
- R&D survey
conversion
- Notice
Tracking
International
Tax
- Monthly cash
and
withholding tax
reporting
- 5471 / return
package
gathering
- Global
provision
package
gathering
Transaction
Tax
Global
Compliance
Compliance
- Global alerts
and dash
boards
- Task tracking
- Standard
processes and
automation
- Support
attachments
- Key figures
- Document
management
- Notice
Tracking
- Return,
Filing,
Payment &
Refund
automation
- Resource
scheduler
Audit
- Enhanced
document
management
& file sharing
- Audit
tracking tool
- Audit project
management
and tracking
tools
Billing &
Research
- Document
management
- Exemptions
- WIP tracking
- Policies &
procedures
- Planning
ideas &
opportunities
- Certifications
procedures
Tax portal process samples
►
►
►
►
►
Data collection – manage data collection
requests centrally, create customized
forms/templates, upload documents, and track
progress of requests.
Compliance management – centrally manage
filing deadlines, resource management,
workpapers with version controls, automated
workflow approvals with audit trail.
Audit management – web-based management
and tracking of audits across all tax functions.
Notice tracker – centralize notices (state,
transaction, etc.) with support attachments and
links to filings utilizing multi-level workflow and
reporting metrics to reduce the clearing cycle.
Dashboards and reporting – dashboards and
reporting can give management a snapshot into
the underlying data in your tax portal to let you
easily see metrics around processes and data.
Page 33
Tax portal benefits
Page 34
Sector
Embedding analytics across tax services
Subservice
Global
line
compliance
Indirect
and reporting
People
advisory
services
Analytics
Transaction
tax
Law
Page 35
Business
tax
services
International
tax
services
►
Analytics is not an isolated tax offering
►
Analytics is the method through which
all tax services will be delivered
►
Analytics is the future of tax
Analytics and tax business intelligence
Components
Visual
Data science
Big data
►
Interactive presentations
►
Statistical analysis/modeling
►
Large datasets/advanced data integration
Page 36
Tax value
►
Control/risk management
►
Efficiency and cost reduction
►
Tax affected business decisions
►
Enhanced stakeholder communication
Analytics and agile data management platforms
►
Scalable enterprise
solutions that leverage
robust software products
►
Agile tax data management
architecture with analytics
plug-ins
►
Visualization and
interactivity
►
Tools often being deployed
outside of tax
Source: Gartner (February 2016): Business intelligence and analytics platforms
Page 37
Unified data management – Advanced
►
Ability to make data-driven decisions quickly across broad sets of data
►
Significantly reduced effort for new analytic outputs
►
All decision-makers have access to data and analysis
►
Near real-time, cross-functional analysis
►
All relevant data is consolidated, quality-checked and structured for
tax consumption
►
New technologies reduce data management effort and deliver at
high capacities
►
Enhance enterprise investments
►
Prescriptive analysis
Page 38
Unified data management – Advanced
Tax data management
Align
Acquire
Conform
Store
Supply
Tax process
solutions
Key performance indicators,
overviews and collaboration
Security, quality, controls, retention and traceability
Align
Systems of
record
Enterprise
Tax data and document repository
(on-premise or hosted solution)
resource
planning (ERP)
Other source data
Acquire
and
conform
Big data Store
►
►
►
►
►
Transaction
tax engine
Financial
Nonfinancial
Industry content
Benchmarks
Social media
Supply
Analyst
benchmarks
Court cases
Other TBD
Audit
adjustments
Page 39
Social media
content
Co/outsource/in-house solutions and
processes
Country-level
compliance
Global provision and
forecast
Tax planning
Supply chain
reporting and
analysis
Tax audit
management
Managed tax service support
Tax search
Process views
Provision
Global compensation
Statutory reporting
Workflow, calendar, and
status reporting
Tax data analytics
VAT
Credits and incentives
Statutory reporting
Effective tax rate
Transfer pricing
Sales/use
Forecasting
Cash tax
Income tax
Tax data analytics samples
Page 40
Tax data analytics samples
Page 41
Enablers and success factors
►
Look for opportunities to initiate changes, such as merger synergies, finance transformation and
financial system upgrades
►
Engage with your finance department – tax should be in every finance initiative going forward
►
Focus on the data; clear the “noise,” so tax technical team can be more effective
►
Look at process and systems from an integrated perspective for all tax data: Planning, Provision,
Compliance, International, Sales and Use, Property and Audits
►
Understand infrastructure parameters – what tools and resources do you have available
►
Ensure there is commitment from executive management
►
Engage tax department-wide portal deployment – be the company leader and success story
►
Actively participate in governance to ensure consistency
►
Develop and utilize Tax Technology Group – becoming critical parts of large tax organizations and
are dramatically changing the way tax works
Page 42
Enablers and success factors
Resource needs
“Whenever new technologies … enter the market, they present an enormous opportunity
but create another skills deficit to fill.”
– Mike Merritt-Holmes
CEO Big Data Partnership
Analytics consumption
Analytics delivery
Analytics
professionals
Data capture
Analytics innovation
Analytics planning/coordination
Page 43
Auditors
Consultants
Tax
professionals
Professionals with an analytics mindset
Transaction
professionals
Enablers and success factors
Resource needs
Competency
Analytics professional
Data capture
Analytics innovation
Analytics planning and
coordination
Professional with analytical
mindset
Execute the process to efficiently
and cost effectively obtain data
by establishing repeatable
capture methods
Design and build process and
specific analytics that align with
organization priorities
Assist tax teams to develop
analytics plans and coordinate
analytics delivery
Integrate analytics into the
service delivery process using
analytics for high quality work
products and insight
Skills
►
►
►
Knowledge
Tax professional
►
►
►
►
Page 44
Experience with various
techniques for extracting data
from systems
Knowledgeable on data
structures in ERP systems
Experience managing the
transfer, reconciliation and
validation of large data sets
►
Basic accounting and finance
Data structures and big data
Business information systems
Extraction tools and
techniques
►
►
►
►
►
►
►
Understand process,
methodology and objectives
Skilled at designing and
building analytic models
Understand the flow of data
through business processes
on common ERP and systems
App design and programing
►
Programming
Data management
Data visualization
Data science and statistics
►
►
►
►
►
►
►
Execute the end-to-end
analytics process
Creating initiative plans
defining nature and scope of
analytics
Identifying the data needed to
support the plan
Coordinating the delivery of
analytics to the department
►
Project management
Strong communication
Service delivery methodology
Analytics application
►
►
►
►
Core tax experience
complemented by an
understanding of the impact
of analytics on each phase of
the tax life cycle
Understand the flow of data
through key business
processes and key systems
Business information systems
Business process and
transactions flows
Business analytics
Next steps
►
►
►
►
►
Assess your position on the maturity model
Understand the Content Management and Collaboration and analytics landscapes
within your organization
Assign responsibility for owning CMC and analytics within Tax
Consider how analytics can support and grow your Tax function
Encourage innovation
Growth drivers
► Increased awareness of benefits
► New analytics tools and capabilities
► Availability of data
Page 45
Adoption barriers
► Lack of analytics specialists with tax
background
► Resistance to replace gut instinct
decision-making
► Lack of best practices
Questions/comments
For more information about this presentation, please contact:
Travis Fox
Alan Williamson
Tax Operations and Systems
Dallas, TX
+1 214 257 8404
[email protected]
Content Management and Collaboration
Austin, TX
+1 512 736 8553
[email protected]
Tony Ferrante
Tax Technology and Data Analytics
Austin, TX
+1 512 288 4892
[email protected]
Page 46
11th Annual
Domestic Tax
Conference
28 April 2016 | New York City