Corporate Tax

Learn how to automate corporate tax compliance processes

Internal direct control functions are under increasing pressure to do more with less – from helping reduce fee budgets to improving control and governance to acting as a business partner – all in the context of changing laws and expanded reporting requirements.

While the use of tax engines for indirect taxation may be commonplace, real-time reporting and automation of corporate taxation is less common. Similarly, similar activities – such as group reporting, statutory annual financial statements and closing tax returns – often only take place on an annual basis. For large corporations with broad legal personality, these obligations often consume significant resources and time.

In the UK, the introduction of “Making Tax Digital” for corporate tax is in preparation, along with other expanded reporting requirements. This contributes to a governance-driven ecosystem that already requires in-depth processes to perform the duties of the Chief Accounting Officer (SAO) and limit the risk of agents criminally facilitating tax evasion – processes that cannot necessarily be passed on to advisors. In conducting business risk assessments, HMRC is interested in how the company approaches technology and how it can drive insight and ultimately accuracy.

Over the past year, WeWork’s tax department has been working on transforming its corporate tax functionality with the aim of strengthening risk and governance processes while finding synergies (particularly timing synergies) in the above areas of activity.

Transformation of reporting processes for direct taxes

Gathering, cleaning up, and manipulating data is an often ungrateful chore for the in-house tax professional who has historically been tied to inherited processes and # N / A-saturated spreadsheets.

Even if it involves an undeniable expenditure of time and resources, automation can relatively quickly enable the internal control function to be realigned away from time-consuming manual compliance processes towards more value creation and risk prevention.

The path to automation is definitely recommended as a gradual path, but the improvement on multiple fronts that can come from making small incremental changes is strong.

Vehicle for automation and evaluation

There are several avenues for automation for corporate tax compliance. In some cases, it may be best to do tax awareness directly in Enterprise Resource Planning (ERP) software. In other cases, especially if legal accounting adjustments are not maintained in the ERP, several data sources are relevant for the preparation of the tax return or (as in our case) there is a large footprint of the legal entity, an external workflow tool could be more suitable.

The workflow tool acts as a bridge between incoming raw data and the outputs of the tax declaration and / or tax provision software.

The workflow tool option also offers the ability to quickly make changes within the corporate control function – no ERP configuration changes and no metadata changes that may require lengthy change management processes (at least in the first transformation iteration).

We chose Alteryx Designer – a data analysis tool that enables rapid data preparation, consolidation, reporting and predictive analysis to consolidate source data for filling out statutory bank statements and corporate tax returns and reports. However, there are numerous alternatives from Microsoft (Power Automate) and others.

Our choice was based on user friendliness and a clear and accessible training path, but also on the widespread use of the tool elsewhere in the financial organization and thus future synergies between sub-functions.

Insource vs. Outsourcing

The question of automation can also stand alongside the question of insourcing or outsourcing tax compliance and reporting matters and should be considered in parallel.

In evaluating a suitable model, the ability to have control over SAI-related governance, as well as the ability to develop automation skills to facilitate comprehensive oversight (e.g. tax evasion) led to the decision to become an essential part of our corporate tax compliance to anchor internally. This approach also works for our organization in the context of a large legal entity with significant repeatable effort and where our systems and processes evolve as we continue to transform our business.

For other companies, there may be situations where it is right to fully outsource automation or to share the automation effort and reward in a co-sourced relationship with an advisor, depending on the return on investment.

Manually to integrated data feeds

Application programming interfaces (APIs) are commonplace in a variety of data-driven scenarios. In the simplest context of corporate tax automation, APIs can enable direct data entry from ERP (and other systems) into the workflow tool and further into the tax filing / tax provision software, creating real-time tax reporting depending on the sophistication of the tax logic in the workflow tool.

Using APIs does not necessarily mean a significant investment in development or programming skills. These APIs are increasingly located in a “connector” – a ready-to-use means of facilitating the flow of data from the ERP to the workflow tool and tax reporting software. In fact, the availability of such connectors influenced some of our workflow tools and decision making regarding tax compliance and reporting.

However, to begin with, it is recommended that you use existing reports and data sources and upload them to the first phase of the workflow. This inherently supports the testing process in the transition from manual compilation and manual manipulation to automated manipulation and finally to integrated compilation and automated manipulation.

In both cases (i.e. with or without an API connection) the advantage of using a workflow tool is that the source report is never changed with a clear visualization and an audit trail to find out exactly how the source data is manipulated and prepared will.

Discrete data for machine learning

General ledger (GL) reporting and other inputs often contain significant amounts of information that can help promote insight and control logic (e.g.

It is possible that a combination of general ledger account and journal category and / or cost center controls the basic tax sensitivity analysis and the first phase of a corporate tax workflow. But as the workflow evolves, machine learning in the form of Alteryx is readily available.

Next Steps

Based on our experience to date, we’ve focused on reporting on tax compliance, but in the next phase of our automation and transformation we’ll be looking at how our data analytics tool can support our transfer pricing efforts. The tool’s ability to simplify and speed up cost allocation calculations and models is much debated.

Tax forecasting will also be a more painless exercise. We expect fewer true-ups from front-loading calculations in the group delivery phase of the compliance cycle and will apply the control logic to forecast and planning data.

Tax doesn’t have to tax

Using a data analysis tool may at first glance seem like a sledgehammer to crack a nut – or the thought of upgrading your skills may seem like a daunting task. However, none of these claims are true.

There are many sources of training for data analysis tools, so training can be an inexpensive and relatively quick experience. The feedback from our team was that the data analysis tools are more user-friendly than a spreadsheet tool – not only because large amounts of data can be managed more efficiently, but because the step-by-step preparation, transformation and analysis flow clearly and can be explained.

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