Modern Tax Technology – Beards Optional

The interesting thing about being a ‘tax person’ is the surprise most people get when they meet me for the first time. Imagine, if you will, what it might be like to meet an honest politician; shocking to be sure, and if I had to guess, that’s probably what it’s like to meet a tax professional who isn’t just that ‘old beardy guy in the corner who never talks at the office Christmas party’. 

Of course, we all know that such perceptions are merely the vestiges of a bygone era and slowly but surely the realities of the modern-day tax profession are finally being seen. 

And, that’s because things have changed! Like most business activities tax has been hugely influenced by emerging technologies. These in turn have presented new and energising offshoots of tax industry-related specialisms. Tax careers are no longer just the preserve of the fuddy-duddy but an exciting pathway for men and women to unite technological passion with professional ambition. 

So, what’s changed? Or, perhaps rather, who are the biggest precipitators of this ‘tax digitalisation revolution’ you ask? Well, for anyone looking after a global portfolio you’ll already be keenly aware that scores of tax authorities across the world are ramping up their own use of technology when it comes to ensuring businesses are in the business of compliant reporting. They say that ‘necessity is the mother of invention’ and for tax compliance in particular, never has an adage rung so true. 

Most ERP systems consider vat or other tax determination as an afterthought – often resulting in a very poorly designed and rushed job

Despite the obvious gains – that are proffered by any revolution – the digitalisation of tax has not been without its fair share of casualties; this is old school warfare being fought with 21st century tech. As far as the tax authorities and businesses are concerned, the rules of engagement are very different than anything that’s come before – it’s hardly surprising that some have found themselves unwittingly caught in the crosshairs. Take the HMRC’s ‘Making Tax Digital’ initiative as a prime example of this. Conceptually sound but fundamentally flawed, the idea was to force businesses to digitally link their data source to the VAT submission. The problem was forgetting that, like most financial processes, the backbone of reporting is largely based on Excel. HMRC initially wanted us to dump the spreadsheet but when the droves of angry and vociferous business owners ‘kicked off’ over the impossibility of ditching their favoured tool, HMRC swiftly backpedalled in favour of allowing Excel under its definition of ‘digital technology’. 

Therein lies the problem – Excel is needed because it allows rearrangement of data into a compliant format. The root cause is the poor quality of tax data and the often-shocking determination processes in our ERP systems. If the data going in is bad then it stands to reason that the data extracted is irreparably flawed too. Most ERP systems consider VAT or other tax determination as an afterthought – often resulting in a very poorly designed and rushed job. Other spanners in the works might include those pesky and capricious tax authorities that love springing a new reporting requirement in haste – placing the entire onus of meeting those requirements on businesses.

That’s why it’s so important to involve the new breed of tax professional within any ERP project from the start – who better to seek the right tax technology advice from?