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Top 5 Myths of Automating the Indirect Tax Function


Top 5 Myths of Automating the Indirect Tax Function
Every business needs a cost-effective way to manage its compliance requirements while keeping up-to-date on indirect tax developments. For many, tax automation can be the key to such support and compliance. When done correctly, tax automation provides critical support for a tax department, gives a business instant updated information and ultimately can lead to increased sales. Best of all, there are plenty of tax solutions to choose from. Taxand US discusses the top 5 myths of automating the indirect tax function.

Myth 1: Tax automation projects will fit any budget

While it is true that sometimes an indirect tax automation project can be implemented on a shoestring budget, the fact is that these types of implementations make up only a small percentage of tax projects. A typical automation project can be quite expensive, so it is important to weigh the cost of not automating the indirect tax function.

Myth 2: Tax automation engines are "plug & play" solutions

Tax engines come standard with rates, rules and smart tax logic algorithms covering indirect taxes for the US and the rest of the world. But these engines can be complex, so it is important to note that all this standard information will not be useful if the system is not configured to process the incoming transaction data and return the tax results to the financial systems in a meaningful way. It is therefore essential to understand the company's business and tax requirements, and then design and configure the system appropriately (while performing extensive testing) to verify that all systems work. Without this important work, a tax engine will not be able to determine and calculate the correct tax.

Myth 3: Once the tax engine is in place, it will maintain itself

For the tax engine to truly support a company, it will require regular maintenance; potentially a lot. Every time new sales tax rates and rules files are published by the vendor, the system requires an update. Obviously, a company will change too. Every business change that involves new products, a new place of business or other changes could have an impact on their tax position.

Myth 4: Every tax engine can deliver what I need

It can't be assumed that every tax engine can do what is required by a company. They may have unique requirements or special taxes that don't come "out of the box." It is important to know what needs to be verified that the tax engine can deliver on those requirements. Also, be careful that the tax software vendor does not promise more than can be delivered.

Myth 5: Standard reports are all I need

In most cases, "canned" reports support most of the standard reporting requirements but not all. The key part is that the tax engine has the appropriate data elements for all the reports needed and that the tax engine results can be reconciled with the financial systems. A tax technology consultant is not as familiar with the company as they are. Therefore, consultants need the information provided to be complete, correct and understandable.

Taxand's Take
Getting a tax automation solution that meets all of a company's needs is the optimum goal. However, it takes a team to do it. A tax technology team should adopt an approach that combines both tax technical experience and systems expertise to bridge the knowledge gap of typical system integrators, IT and tax departments. When multinationals consider upgrading your existing tax engine, or want to review what is available today, we suggest that they pick a team that is familiar with working with the top software providers. It is also important to make sure the team has sufficient experience integrating into numerous ERP packages.


Jeudi 27 Septembre 2012

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