Three Types of Process Mining for Indirect Tax Compliance

Do you want to automate your current process – or transform it? How would you like to do both? Whatever your goals, there are tools that can help.

It’s something of a truism these days to say that the success of any technology initiative largely depends on paying careful attention to the processes that it automates. Yet, that’s an especially important principle to keep in mind in today’s world of artificial intelligence (AI) and advanced automation, where the technologies can directly shape the processes themselves.

As my colleague Michelle Engro mentions in her post, I recently looked at two technologies that can improve sales tax operations in a Tax Notes International article.

You’ve likely heard about robotic process automation (RPA), a technology that automates repetitive, labor-intensive business processes by transferring data among disparate software systems in ways that could previously only be performed by humans. As I wrote in the article, “RPA is like an employee who can work effectively 24/7 while maintaining a high level of accuracy in repetitive tasks.” It’s a superb tool for ensuring consistency in tax compliance operations.

Perhaps less well known is process mining, a technology that analyzes event data – the actual behavior recorded in audit logs – to give companies a better understanding of their processes as well as insights into ways to improve them. In the article, I discuss three types of process mining activities:

1. Discovery: Where no defined process is in place, the technology can automatically discover and model an actual process based on events recorded by the system. This can result in surprising and valuable insights, such as “Returns for company X require most manual adjustments to the imported data.”
2. Conformance: If a well-established process is in place, process mining systems can detect and analyze events where actual performance deviates from the company’s internal guidelines. For example, a company may have a rule that all VAT returns should be checked by somebody other than the person who prepared them. The process mining technology can determine when that review stage is skipped, perhaps due to filing-deadline pressure.
3. Enhancement: Using information from the audit log, process mining systems can provide insights that enable tax companies to improve their internal guidelines.

I see these tools as complementary to each other – you can leverage process mining to transform your indirect tax processes, and RPA to accelerate them. It’s no wonder these technologies are of growing interest to tax managers.

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.