It is no secret that corporations worldwide are facing major reforms in tax regulation. Specifically, tax authorities are increasingly mandating digital reporting of transactional taxes as a means of improving their tax collection capabilities and closing the VAT gap. This may seem ominous for corporate entities who are wary of constant governmental scrutiny, but by putting these ten best practices in place, you can ensure your company is up to the challenge and prepared to reap the benefits of the Digital Tax Transformation.

1. Prepare for large scale SAFT-T filing

   A key VAT reporting trend is the adoption of the Standard-Audit File for Tax. Where traditional VAT returns consisted of aggregated data, the SAFT-T files provide tax administrations with non-aggregated invoice-level transactional data in digital format. Many countries are requiring companies to provide this data within only a few days of an invoice being issued. It is critical to monitor this development closely and prepare your reporting capabilities so that your company is ready to create SAF-T reports in a blink of an eye.

2. Eliminate manual processes

   Manual processes need to be automated. Tax authorities are requiring ‘real-time’ or ‘near time’ reporting, which means there is no space left for manual processes. The traditional two-week quality review cycle of data which is heavily dependent on manual interactions will be history.

3. Improve the quality of your master data

   Considering the increasing amount of data that needs to be disclosed to the tax authorities and the speed of which this has to happen, it is critical to have all data in the system ‘first-time-right’. This requires a fully accurate and complete master data set, including vendors, customers, materials and tax codes.

4. Be prepared for mandatory e-invoicing

   Tax authorities are adopting mandatory e-invoicing processes. This gives tax administrations real-time insight into taxpayers’ transactional data and allows them to easily identify anomalies and validate VAT refunds. Tax departments should work closely with Finance to set up a robust plan to implement e-invoice processes into the operational finance processes.

5. Integrate your VAT department

   As there are so many additional sources of data that will need to be validated for VAT compliance, the Vat Department will need to be closer to the business than ever before. Because there will be no time for manual reviews, the VAT manager will need to take a proactive role in overseeing VAT compliance at the source to make sure all that VAT-relevant data is processed correctly the first time. This change in role will also impact the way the governance and control framework is set up in the company. Companies will need to ‘digitise’ their tax control framework to this end.

6. Use Cloud-Based Data Solutions

   The major ERP players are now focusing on cloud-based solutions which pull from one big corporate data lake and can be seamlessly integrated in real-time with various tax-related applications. This will give the VAT department access to all corporate data relevant to VAT analysis at any point in time, even for the smallest company transactions. Having quick and complete access to data will be a critical requirement in the near future.

7. Invest in big data capabilities

   With the major data proliferation, the challenge now lies in structuring and interpretation. This is the area where emerging technologies like artificial intelligence and machine learning will make a difference. VAT specialists have a lot to gain from developments in these technologies, specifically in the area of semantical analysis (giving meaning to data).

8. Consider adding data architects to the tax team

   The data overload will quickly become too much for the legacy tax departments to handle. To deal with this challenge, data architects will soon be an integral part of the VAT process to ensure that tax professionals can easily sift through the data pool to find VAT information that is relevant, accurate, and up-to-date.

9. Hire digital-savvy tax professionals

   Tax departments must introduce new skillsets within their teams to keep up in the digital era. When onboarding new talent to your tax department, look for skills and education related to technology, system architecture, finance and business. The tax professionals of tomorrow will need a lot more than tax knowledge and good computing skills to succeed in this new environment.

10. Reboot your team’s mindset

    Existing resources will need to expand their knowledge in data interpretation and communication in order to fully utilise the available data in the most efficient and effective way possible. Equally important is the training in soft skills, as VAT specialists will no longer be working in their own silo and will need to collaborate with other departments and external stakeholders as well.

The tax departments of tomorrow should embrace the right brain-left brain approach when it comes to hiring strategy. On the one side, team members will require strong analytical skills, a technological mindset and tax expertise. On the other side, they will need to have data storytelling capabilities to understand the meaning of data and communicate insights. This approach, along with the adoption of the correct digital solutions, processes and strategies, will enable a smooth and resolute transition into the digital age.

Rick Kostons
Senior Tax Manager, supporting clients and internal teams on global VAT/GST matters, product development and process efficiency & alignment.

Rick has a Master’s degree in Tax Law. Eight years of consultancy experience in international VAT and BPO with PwC and Deloitte. Rick is a member of the Dutch association of certified tax advisors (NOB) and is a Lean Six Sigma black belt.

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