Tax leaders who want to optimize their supporting technology can get started by addressing a pervasive tail-end challenge.
As their digital transformation efforts have surged in recent years, corporate finance departments have emerged as early-stage adopters of new technology capabilities – including cloud applications, the use of robotic process automation (RPA) and even chatbots. Conversely, comparatively few tax departments are involved in discussions around new investments in advanced technologies. Those that are, typically get involved only at the tail end of those discussions.
Tax should get involved in these investment decisions early and often for several reasons, including the following complications driving the need for advanced tax technology:
- Continual changes to sales tax rates: There have been more than 3,000 changes to state, county and city sales and use tax rule and rate changes in the past five years. That’s an average of more than 600 changes annually among the approximately 11,000 different taxing jurisdictions in the U.S.
- The growing likelihood of post-pandemic tax changes: Many U.S. states suffered painful tax revenue losses in 2020 as a result of the COVID-19 pandemic. To address these budget gaps, states are considering numerous tax policy, rules and rate changes. Maryland has already done so by enacting the country’s first digital advertising tax. Connecticut, Indiana, Oregon, New York and Washington already have similar proposals under consideration this year. New tax laws inevitably result in new tax planning, compliance and audit complexity.
- Growing competition for technology dollars: Tax is far from the only organizational area contending with growing complexity. Many other parts of the business are clamoring for technology improvements that generate valuable analytics and insights. CFOs and CIOs make technology budgeting decisions based on the efficacy of the business cases supporting those requests.
Tax leaders can get started on making a stronger case for new tax technology investments by establishing a complete inventory of its existing systems and applications. This register – which should identify the functionality of all tools the department has licensed, purchased and deployed – will help build credibility with IT decision-makers.
Tax teams should also develop a similar, yet broader, understanding of the technology inventory and investment priorities throughout the finance function. This knowledge will help tax leaders get involved in technology investment discussions as early as possible so that they can help assess the best ways to integrate with those offerings.
Those are just two steps tax leaders can take to up their technology investment games; here’s a deeper look at another way to do so – by creating a tax technology roadmap.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.
Business Development Director, SAP