70% of participants anticipate that tax authorities will have more direct access to their financial data within three years
The digital transformation of tax administrations and new regulations that place an increasing emphasis on the transparency of tax reporting are driving companies around the world to implement Next Generation Enterprise Resource Planning (NextGen ERP) solutions, and 24% of them already use such systems, while 86% are in the process of implementing them, according to Deloitte Tax Transformation Trends – Technology in Focus study. This evolution takes place in the context in which 70% of companies think that tax authorities will have more access to their financial systems within three years.
The companies’ representatives estimate that this process will intensify with the implementation of the two pillars of the Organization for Economic Co-operation and Development (OECD) reform, agreed by almost 140 states in 2021, regarding global minimum taxation and profit allocation among the jurisdictions of origin. In fact, 60% of the companies already using a NextGen ERP system claim that it allows them to conduct sophisticated analyses which are necessary in the context of the new regulations. By comparison, the analysis ability is almost three times lower in companies that have not yet implemented such a system.
For these reasons, three-quarters (75%) of companies expect their teams to spend more time ensuring internal systems are properly configured to keep up with tax compliance requirements.
“The shift to digital tax administration is advancing rapidly at global level, amid developments in the economy, and authorities are increasingly focusing on identifying correctly and timely the taxable transactions, which directly influences the development of technologies in this area. The new tax reporting requirements are based on the automatic exchange of data between taxpayers and authorities, so the modernization of internal systems, which leads to improved quality of financial and accounting data, becomes essential for a proper compliance. In Romania, with the implementation of SAF-T (Standard Audit File for Tax) and of the other tools that are part of the tax administration digitization process, such as e-Factura or e-Transport, companies become more aware about the need to upgrade their internal systems in order to provide the authorities with the necessary data correctly, on time and in the requested format,” said Vlad Boeriu, Tax and Legal Partner-in-Charge, Deloitte Romania.
Three-quarters of the participants to the study (75%) say they intend to use artificial intelligence (AI) and machine learning (ML) over the next two years to manage tax liabilities, especially for real-time adapting of reporting to changing requirements, classification of tax data and improving data quality. However, concerns about mismanagement of data can hamper companies’ efforts to develop such reporting systems, say 60% of participants. Even more likely to delay AI and ML development are internal resistance to change (71%) and a shortage of skilled talent (62%), the study shows.
On the other hand, four-fifths of tax leaders (79%) say they intend to outsource processes for specific tax functions, but most of them (74%) also plan to bring at least some operations back in-house once they have developed the internal capabilities to manage them effectively.
Deloitte Tax Transformation Trends – Technology in Focus surveyed more than 300 senior tax and finance executives working in large companies, with annual revenues of US$ 750 million or more, active in ten countries: Australia, Belgium, Canada, China, Germany, Japan, the Netherlands, Switzerland, the UK and the US.