With business dynamics changing every year, companies have been making changes in their products, customer outreach, customer service etc.
These changes are done to ensure that top-line (sales) growth is maintained and bottom-line (profit) is maintained too.
Whether it is about implementing bots to answer repetitive queries asked by customers and not involving humans (customer care team) or implementing an analytics tool to automate reporting for management and not hiring people to do mundane MIS jobs.
Technology has made inroads into every function of business. How can tax function stay away from this?
Tax function in India has been traditionally working on excel sheets and not even been accessing ERP systems. Yes, tax function does get data from ERP system in excel sheets, which they do analyse manually and use different utilities for periodic compliances.
Let us first understand what are the risks associated for a company is found being non-compliant or having taken a wrong position for taxes
Reputation Risk – Government of India and governments across the world are implementing technology to get trade information, tax information. This is being done to avoid leakages and robust systems are being built to make compliances online. Any company caught on the wrong side or getting an assessment notice faces a risk of reputation loss. Getting into litigation has its own timelines and associated costs.
Penalty – With business volumes increasing for companies, it is imperative to have systems inbuilt to avoid missing any transactions for compliance. Missing the transaction for filing taxes due to manual processes may become an expenditure which was not provisioned and disallowance of expenses.
Business Growth – With business growing into different regions and sectors, companies need to be aware of the tax positions they take. There have been some instances in the past when large corporations had taken certain tax positions and those were not found in accordance with the law of the land. Due to this, business and reputation of these corporations have taken a severe dent
Looking at the associated risks, Tax department can no more be a back-office function to get intimation after business is being done. Tax is a strategic function like other functions of an organization.
How a modern tax function should operate
Involved in the business process – Tax function must be involved in business process when decisions like business area, location etc. are being finalized. How accounting of invoices should be done, with proper tax treatment, so that there is a clear visibility to tax team in terms of taxes payable and tax credits available. Another important aspect to consider is that tax related information related to a customer or vendor shall be captured and verified and ERP systems should have checks to ensure this.
Equipped with Technology – Tax function can longer rely on manual processes, using spread sheets running into lakhs of rows and spending time on mundane activities. Tax team need an information hub where they can access all necessary information related to accounts receivable and payable data, customers and vendors master data, deviations happening and moreover making tax team proactive in their approach and not reactive at the time of periodic compliances. In case of policy changes or tax rate changes, technology can be of great help in saving the time required to respond to changes
A modern tax function can
- Save millions for a company by avoiding risks
- Respond to policy changes in shortest possible time by recalibrating the business processes with the help of technology
- Claiming tax credits on time
- Adding to the bottom-line of the company