Tax Transformation Starts Long Before Technology

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.