A few months ago, when I joined a tax transformation assignment where the first workshop I witnessed quickly turned into a technology discussion.
Questions came thick and fast:
- Should
we implement Oracle TRCS?
- Can
OneSource handle this process?
- How
will we support Pillar Two?
- What
integrations will be required?
- Can
Country-by-Country Reporting be automated?
All valid questions.
But after a few workshops, I noticed something interesting.
The technology wasn't the biggest challenge.
In fact, we were yet to agree on:
- who
owned the tax provision process
- where
tax adjustments should be maintained
- how
deferred tax was calculated across jurisdictions
- which
system was the source of truth
- what
the future-state tax operating model should look like
At that point, it became clear that selecting a technology
platform was not the first decision that needed to be made.
It was probably the last.
1)
Operating Model
The Question Behind Every Tax Transformation
Most tax transformation programmes begin with:
"Which system should we implement?"
In my experience, the better question is:
"How do we want our tax function to operate in the
future?"
Until that question is answered, every technology discussion
becomes speculative.
A modern tax operating model typically needs to support:
- Tax
Provision
- Deferred
Tax
- Tax
Compliance
- Return-to-Accrual
- Country-by-Country
Reporting
- Pillar
Two
- Audit
and Regulatory Reporting
The challenge is that many organisations have evolved these
processes independently over several years.
As a result, the same activity may be performed differently
across entities, jurisdictions and teams.
2)
Process
Technology Cannot Standardise What The Business Has Not Standardised
One of the most common observations I see is that
organisations attempt to automate processes before they have agreed how those
processes should work.
For example:
One jurisdiction may calculate capital allowance adjustments
one way.
Another jurisdiction may calculate them differently.
A third jurisdiction may maintain the information in an
entirely separate workbook.
The natural assumption is:
"The new technology will solve it."
In reality, technology often exposes inconsistency rather
than resolving it.
Before automation comes standardisation.
Before standardisation comes process design.
3)
Data
Data Is Usually The Real Transformation Programme
Another lesson I've learned is that the most difficult tax
discussions are rarely about technology.
They're about data.
Tax data often exists across:
- ERP
platforms
- Consolidation
systems
- Tax
compliance solutions
- Local
spreadsheets
- Regulatory
reporting tools
Most organisations don't have a shortage of data.
They have a shortage of agreement.
Questions such as:
- What
is the source of truth?
- Which
balances belong to Finance?
- Which
adjustments belong to Tax?
- How
should accounts be mapped?
- Which
data supports multiple reporting requirements?
can consume more time than system configuration itself.
A single ledger account may eventually support:
- Tax
Provision
- Deferred
Tax
- Tax
Returns
- Country-by-Country
Reporting
- Pillar
Two
Designing that data model properly can significantly
simplify future reporting requirements.
4)
Ownership
Ownership Is Often The Missing Piece
One of the most underrated aspects of tax transformation is
ownership.
Technology can automate calculations.
Technology can automate workflows.
Technology can automate reporting.
What technology cannot do is decide who is accountable.
Questions such as:
- Who
maintains tax rates?
- Who
approves tax adjustments?
- Who
reviews tax provisions?
- Who
owns tax return reconciliation?
- Who
signs off Country-by-Country Reporting?
are operational questions, not technology questions.
Yet they often determine whether a transformation succeeds.
5)
Technology
Where Technology Becomes Powerful
This doesn't mean technology isn't important.
Quite the opposite.
Once operating model, process, data and ownership have been
established, technology becomes a powerful enabler.
Platforms such as Oracle TRCS, OneSource, SAP, FCCS,
Longview and others can help organisations:
- automate
calculations
- improve
control and auditability
- reduce
spreadsheet dependency
- improve
reporting consistency
- support
increasing regulatory requirements
But technology delivers the greatest value when it is
supporting a clearly defined vision rather than attempting to create one.
My Biggest Takeaway
The most successful tax transformation programmes have
something in common.
They spent time defining:
- Operating Model
- Process
- Data
- Ownership
before discussing system functionality.
Technology was still important.
It just wasn't where the transformation started.
Because ultimately:
Technology can automate a tax process.
It cannot define one.
And that's why I believe tax transformation starts long
before technology.
