How Important is Technology in Today’s Tax Landscape?

The technological landscape has completely changed the face of the business world. Businesses can now run much more efficiently in comparison to the previous years. 

The technological advances have changed the landscape of businesses to a great extent. It has led to a transformation of the business operations as well as the way of conducting business. 

It also has given a completely new perspective to the world of finance. Taxation rules and regulations have been amended to the changing technological landscape.

The role of digital technology

The tax authorities have embraced digital technologies to aid in their efforts. They use it to interpret taxpayer trends and ensure that businesses are able to comply with local laws more effectively. 

Additionally, tax authorities can digitize taxpayer information and share it across other jurisdictions. As more technologies become available and their costs decrease, tax authorities are seizing the chance to prevent and identify criminal activity, thereby enhancing their revenue collection and operational efficiency.

5 reasons why technology is important in today’s tax landscape

1. Accuracy and compliance

From BEPS to GAAP to IFRS, as well as statutory and local obligations, multinational tax departments must comply with a multitude of standards. 

This increased regulation requires multinational corporations to provide accurate information regarding the global allocation of their income and taxes paid, as well as certain indicators of the location of economic activity, and also information regarding which entities conduct business in a particular jurisdiction and the business activities conducted by each entity. 

In order to ensure compliance, multinational firms are looking to tax technology as the cornerstone for a worldwide control system for master file and country-by-country reporting.

And there is no better source of correct data for audit substantiation and closing actions than a consolidated tax technology platform. 

Using automated data, you may easily transition from year to year, retrieve historical “point in time” data, and generate reports. TThis data’s uniformity and precision provide auditors with a single source of truth. It also permits last-minute changes in the quarterly close process to be automatically reconciled.

Automated data also enables fast and accurate provision calculations, thereby making your job and the job of your staff light years easier.

2. Process efficiency

In previous decades, tax technology was limited to spreadsheets and shared files. Currently, dashboards, single sign-on platforms, cloud-based systems, and ERP migrations have saturated the business. That creates a unique opportunity to expedite and standardize tax operations. 

As the timeframes for audit requests and closure actions scale back, this type of process efficiency becomes increasingly critical.

Regardless of the sector of tax in which you work — corporate income tax, indirect tax, property tax, trust tax, tax information reporting, or transfer pricing — there is an emphasis on managing the end-to-end tax process without duplication of effort. 

Using tax technology, you may safely gather and collect data from any source and effortlessly transfer it to your income tax or tax provision workpapers. You may also supply harmonized and integrated trial balance data for all tax processes and maintain it current, even when book numbers change. 

With readily accessible data for calculating accurate tax accruals and producing reports and workpapers to substantiate the amounts booked, you may meet these ever-shrinking deadlines with less resources.

3. Transparency

There is no denying the significance of transparency in the current context. Historically, tax areas such as indirect, transfer pricing, and customs have operated separately. Tax technology affords the opportunity to dismantle these barriers. 

This complete perspective on the interaction of calculations between several tax regions provides corporate tax departments with unprecedented insight.

In addition, the G8 and Organization for Economic Co-operation and Development (OECD) have agreed to a global government drive for greater openness in the manner in which corporations comply with local and international tax rules. 

Globally, tax authorities are becoming more aggressive and focused, resulting in increased disclosure and transparency requirements for the business sector. Given the influx of information taxation authorities will have as a result of these laws, there is no doubt that global auditing activity will expand. 

In turn, company tax departments will be subject to heightened scrutiny, which might result in negative valuation, reputation, and financial consequences if they are not sufficiently transparent. This increases the importance of transparent data and processes supported by tax technology.

4. Global collaboration

The worldwide nature of the company today presents the corporate tax department with numerous obstacles. Most departments do not arrange their tax operations globally since it is generally impractical to have full-time tax staff in every country in which they conduct business. 

However, tax technology provides a solution to globalization difficulties associated with time zones and workflow, allowing you to do tax operations in a collaborative and continuous manner.

Tax technology can simulate employees sitting next to one another, even if they are thousands of miles apart. Using tax technology to share information allows tax personnel to collaborate as if they were in the same building. In addition, time zone concerns can be resolved because tax information is constantly accessible.

Once processes are standardized, tasks can run constantly, allowing one team to start up where another team left off in another nation. Global companies also necessitate a command of the local language in order to communicate with local offices and comprehend local reporting standards. This can result in miscommunication or incomplete information.

In addition, local taxing authorities and consultants are often only accessible during standard work hours in a given country, making it difficult to meet deadlines. Through country-specific solutions that share data with the entire global platform, tax technology enables ways to address language obstacles and local reporting needs. Additionally, technology can drastically minimize real estate expenditures by allowing you and your employees to work from anywhere, at any time.

5. Sustainability

Tax department leaders who have successfully raised their tax department’s visibility and strategic focus have one thing in common: they have planned for the future. There are innumerable examples of industries that technology has utterly disrupted. Several businesses were well-prepared and responded accordingly, but the majority were left behind.

The only way to remain relevant and effective in the current tax environment is to envision where you want your tax department to be in the next few years and develop a framework for the future. 

Five to ten years from now, the instruments that you are currently utilizing will undoubtedly have changed. And to keep up, you must be adaptable and open to change, or you risk falling behind. The longer you delay to adopt tax technology, the greater the risk you assume.

Conclusion

Technology has forever changed the landscape of tax preparation. With the help of tools such as tax software and smartphone apps, filing taxes is easier than ever. When filing taxes, taxpayers should take advantage of technology to help ensure that their return is accurate.