Author: World Finance

Tax technology specialists Vertex brought together tax professionals, solution experts, and its customers in Munich for its Vertex Exchange Europe event. World Finance interviewed half a dozen delegates for an update on Europe’s latest tax compliant challenges and technological advancements: you can watch them all in our Tax Automation with Vertex playlist on Youtube.

David Deputy: So blockchain can be used in I think three areas that stick out for me.

One is you’re seeing financial instruments, physical interest-earning assets, and cash flowing assets: they’re being put onto the blockchain as a system of record. So when these assets are transferred, there’s obviously tax involved.

The second is use of blockchain for the automation of approaches. So we’re seeing blockchain being a great way to store identities, to understand who the taxpayer is, for moving information – it’s a great data management system.

But concurrent with the movement of information, there’s the potential to move the actual tax payment at a very granular level. So you can get immediate compliance with no audits, no returns, certified compliance through use of the blockchain, which is one area we’re exploring.

Real-world examples of tax authorities using blockchain: there’s many in the income tax space, where they’re trying to understand who’s not paying on gains and losses in crypto. But to bring it into the transaction tax space, we’ve seen China take a leadership position. Shenzhen province did an e-invoicing experiment on blockchain, along with Tencent, who we had conversations with. It seems to have been successful. Questionable whether it will roll out more broadly, so these are still experiments.

You’ve also seen here in Europe, DG Tax, they asked for blockchain to be explored to reduce the VAT fraud – there’s $150bn roughly of VAT fraud in the European Union – so they’re actually funding grants with technology companies to explore how blockchain could be applied in the European context.

What we’ll see in the future for blockchain – at least our hope – is that blockchain can be the basis for automated compliance. So immediate certification – as soon as the transaction occurs – that you’re in compliance with the government regulations that are applicable. So we feel there’s a great opportunity for us to collaborate, not only with the taxpayers but also with the governments, to become a trusted authority that provides the ability to file your information as necessary.

Or better yet, prove to the government that you’ve used the right information to get to the right result, without sharing it with them. But also to pay your taxes due immediately.

That removes the opportunity for fraud in the minds of the government. And in return, to get a certificate of immediate compliance on a transaction-by-transaction basis. Removing returns, removing audits – absent finding of fraud, there would be no hassle. It would just be a seamless system where money is flowing to the government, and there’s no hassles for the business.

Thanks for watching. Click now for more videos from Vertex Exchange Europe 2019, and please subscribe for the latest international business insights from worldfinance.com

Tax technology specialists Vertex brought together tax professionals, solution experts, and its customers in Munich for its Vertex Exchange Europe event. World Finance interviewed half a dozen delegates for an update on Europe’s latest tax compliant challenges and technological advancements: you can watch them all in our Tax Automation with Vertex playlist on Youtube.

David Deputy: I think we’re seeing an increasing trend towards automation.

When new technologies like RPA, or artificial intelligence, machine learning, come out – there’s always an immediate reaction to uptake them. And the way that happens is, we copy what the humans do. So we replicate the human actions by mimicking it through automation. Which is great! You know, customers are receiving a lot of benefits. We’re working with customers who are going from 15 hours to 15 seconds type of benefits. But that’s only the first stage.

The next stage is always to reimagine why are we doing it this way? Because it was human based. The process was designed to accommodate humans. So we think the next wave of technology is to reimagine how things could be done. And that takes creativity. So we’re collaborating with our customers, we’ve got multiple projects going on, and machine learning, and robotics process automation. But always in conjunction with the customers, to understand how we could reimagine the process, and step beyond replicating inefficient human processes designed for humans with technology, and move to the next level of automation. Which is to streamline and really reimagine the whole process.

The way that Vertex is bringing this technology into the tax realm is, we’re working with both machine learning and robotic process automation in two different areas. One, we’re using robotic process automation to look into automating the process of filing returns. So currently the work’s being done in the US at the state level. So there are state websites where you go, and you have to click through and upload your return. That’s manual labour, it’s designed for humans, these interfaces. So we’re looking to put robotics behind it, to remove the drudgery work of humans going through these websites, clicking, uploading, all that.

Another one we’re doing is, we’re looking at the categorisation of products; for taxability, but more broadly for customs, even for search engine placement. So we’re working with large product catalogues and the mapping to tax categories. And working with multiple clients to build up a machine learning library, that understands how to take a product and make a recommendation on what the appropriate tax categorisation will be.

We’re seeing tax authorities use the technologies as well. For example, last month we hosted a delegation from the Korea tax administration. And in a couple of weeks we’ll be hosting the China tax administration. So they’re doing tours, the Asian countries specifically are doing tours, to understand the best practices in use of analytics for fraud detection and audits. So we’re working with them to explain that our customers would never conduct fraud, because they’re paying a lot of money for a high quality determination engine, and compliance and reporting. So we’re trying to make sure that there’s not a lot of false positives in the efforts. But we’re also educating them on the use of big data, and how analytics can help spot anomalies.

But the key thing is to make sure that the industry collaborates with the governments, so that we’re not stuck with analytics programs that kick out just a tonne of false positives, and we spend the next 10 years of our career responding to government requests for information that are perhaps ill-informed. So that’s our goal.

Thanks for watching. Click now for more videos from Vertex Exchange Europe 2019, and please subscribe for the latest international business insights from worldfinance.com

Tax technology specialists Vertex brought together tax professionals, solution experts, and its customers in Munich for its Vertex Exchange Europe event. World Finance interviewed half a dozen delegates for an update on Europe’s latest tax compliant challenges and technological advancements: you can watch them all in our Tax Automation with Vertex playlist on Youtube.

Andy Hallsworth: So the world of indirect tax is changing – where I suppose we see it changing most clearly is in compliance. Tax authorities want more data more rapidly than they ever have done before – it’s not just a quarterly VAT return.

Take Spain as the example: they want their SII filing every four days. Knock-on effect, it’s not just a compliance issue, it’s a getting-the-tax-right-up-front issue. If you have to submit every four days, you don’t have the luxury of a month-end process. So if you can get the VAT right up front, that’s going to help you meet your downstream reporting requirements in a much more streamlined way.

Tax engines I suppose replace a reliance on having to build rates and rules into the back of an ERP. All ERPs can handle VAT, but traditionally they are a blank sheet of paper. You are responsible for populating them with all those VAT rates and rules, and keeping them up to date as you go along.

A tax engine is full of content; and by content I mean indirect tax content, jurisdictional content – what’s in the EU, what isn’t in the EU, place of supply rules, tax types, tax rates, and so on. That sits already pre-embedded in the tax engine, and for Vertex customers, we, Vertex, keep all that content up to date.

So as rates change, as the UK leaves the EU, as the gulf region introduces VAT, we keep all that content up to date.

If you’re building your own rates and rules in the ERP system, you have to do all that job of maintenance yourself. And as everyone knows, the world of indirect tax is changing more rapidly than it ever has done before.

One other element of tax engines is visibility. It becomes much clearer to the tax person why taxes are being determined in such a way. And it’s much more straight-forward for a tax person to put their business-subjective spin onto things. No longer reliant on a technical team to build something around the back of the ERP. I as a tax person now have the ability to do this myself. It gives me the power to manage tax within my business that much better.

Thanks for watching. Click now for more videos from Vertex Exchange Europe 2019, and please subscribe for the latest international business insights from worldfinance.com

Tax technology specialists Vertex brought together tax professionals, solution experts, and its customers in Munich for its Vertex Exchange Europe event. World Finance interviewed half a dozen delegates for an update on Europe’s latest tax compliant challenges and technological advancements: you can watch them all in our Tax Automation with Vertex playlist on Youtube.

Aleksandra Bal: The European VAT system is changing all the time. And one of the major reforms of the last years is the VAT e-commerce package. The objective is to modernise the European VAT system, to make it fit for the modern economy, and of course to lower the associated compliance burden for online traders.

The VAT e-commerce package will affect sellers – both resident and non-resident – that provide electronic services and goods to European private individuals.

Some provisions of the e-commerce VAT package took effect in January of this year, but the main part will become effective in January 2021.

The first main thing that will change is that the distance selling regime will disappear. Currently, when European businesses sell goods to consumers in other member states, they have to register there if they exceed certain thresholds. This means you may end up having 27 registrations and filing complications in 27 member states. And that of course increases the cost of compliance.

Under the new rules, life will be simpler. You will no longer need to have 27 registrations. You will be able to register in one member state, and do all your filings there. And, if your revenue is below a certain threshold – if it doesn’t exceed €10,000 – you may even use your home country rules to calculate VAT.

Another important provision of the VAT e-commerce package is about online platforms. Online platforms will be involved in VAT collection on the sales they facilitate.

Currently, when you as a seller supply goods via an online platform, there’s only one transaction: seller to customer, and the platform acts as an intermediary, facilitating the transaction.

Under the new rules, there will be two transactions. The seller will sell to the platform, and the platform will resell to the consumer. And this of course means there will be more compliance burden for online platforms, but life will be simpler for online sellers.

So, just like with any reform, we will have both winners and losers.

Thanks for watching. Click now for more videos from Vertex Exchange Europe 2019, and please subscribe for the latest international business insights from worldfinance.com

Tax technology specialists Vertex brought together tax professionals, solution experts, and its customers in Munich for its Vertex Exchange Europe event. World Finance interviewed half a dozen delegates for an update on Europe’s latest tax compliant challenges and technological advancements: you can watch them all in our Tax Automation with Vertex playlist on Youtube.

Alex Baulf: When businesses are looking to automate their tax processes, there are three or four typical pitfalls that businesses can face.

The first one is really focusing on the existing process. What’s currently done by the business; the as-is.

Often a tax process is inherited – you know, often because of a merger or acquisition, people coming and going, leaving the business. Something I hear a lot is, we’ve always done it that way. So a pitfall is, people trying to replicate that. They just try and automate a current human process using robotic process, using technology. But perhaps not really understanding why they’re doing it, and considering is there a much better way of doing it?

Another pitfall is not using the opportunity to cleanse your data. So really review the granularity and quality of that data. That could be any tax sensitive data that’s underpinning a tax process. That could be master data, a VAT registration number. Maybe that’s missing, maybe it’s incomplete. Maybe it’s not in a tax authority database.

Really use the projects as an opportunity to take a look at your data. What’s held, what’s available, what could be available? You know, can you augment that, you can enrich that, you can cleanse and scrub that? Because that will really underpin a compliant tax process.

The third pitfall is really focusing on a single tax requirement in isolation – not considering the wider commercial, legal, regulatory impact that that change to the tax process may have.

An example of that is when a business looks to automate its AP process. They may start issuing and receiving electronic invoices instead of paper. Across the globe, many countries have really strict rules on e-invoicing. That may be around ensuring the authenticity of the issuer of that invoice; but also the integrity of the contents of that invoice.

That needs to be maintained for the entire lifecycle of that invoice. That invoice must be archived for a time period prescribed by each country – they really do differ.

There also may be very strict requirements in terms of how that invoice is archived, and where. If this isn’t considered at the start of a project, what could be seen as an improved tax process may actually lead to the business not being compliant, and open itself up to penalties, fines, interest, and possibly lost input tax.

Another pitfall is when a business doesn’t take ownership of its tax policy when automating a tax process.

Often people see technology and automated process as a silver bullet: something that ensures they’re compliant, and something they can rely on. But ultimately there will be a tax policy, a decision to charge tax, the rate, the location and the timing: that needs to be signed off and approved by the tax function. Maybe a head of tax, maybe another senior accounting officer. That needs to be documented, but it also needs to be able to be articulated to a tax authority to really show how a process works, and how your policy is embedded in that new process.

Whenever you automate a tax process, this is a brilliant opportunity to really speak to your people, understand their concerns. Are there quick wins? Really understand what the requirements are. And look to improve processes, not just automate them.

Data is obviously a very key issue. Really use this project – the time, resource, and energy – to review your data. How can it be improved? This is your – I’d say – quite a unique opportunity.

Thanks for watching. Click now for more videos from Vertex Exchange Europe 2019, and please subscribe for the latest international business insights from worldfinance.com

Tax technology specialists Vertex brought together tax professionals, solution experts, and its customers in Munich for its Vertex Exchange Europe event. World Finance interviewed half a dozen delegates for an update on Europe’s latest tax compliant challenges and technological advancements: you can watch them all in our Tax Automation with Vertex playlist on Youtube.

Geoff Peck: Tax automation of course is not new – lots of companies have actually had tax automation strategies now for approaching 20 years. The important thing right now is that the simple idea of automation has actually proved itself to be not quite enough. Automation is very much – let’s just get this process where it used to be done by a human, now let’s have it done by a machine. It’s a little bit industrial age thinking.

What we’re seeing is tax authorities, they’re already moving beyond the industrial age thinking. What they’re managing to be able to do with big data technologies is in fact, take raw data, and extract automatically using technology, the business sense from that data.

So companies have to try and keep up with this. Now that sounds like a big step forward – it’s actually not as big a step as it needs to be. The old-fashioned, obviously good quality implementations in ERP, and making great use of technology – all that stuff is still important. But what they really now need to be thinking about is adding a little bit of a layer on top of that, which is to really understand some of these concepts, these keywords that are out there. Like digitalisation, like transformation, data-first; even some of the newer technology: how does robotics fit in? Robotics for example has only got automation in it, there’s no transformation in robotics. And start to understand some of these. And layer those across the top of what’s being done. And then actually what you’re going to be able to do is understand what you’re doing at the lower level technically – how it’s really going to impact the business. And start to break out of the kind of mental trap that people are in today, where they really don’t know what the way forward is.

We actually have a word for it – we call it taxology. And taxology, like I say, taxology kind of sits on top of tax technology. We’ve always had good tax technologists who understand the technology, and can implement the technology. But implementing the technology alone, in isolation, has proved not to be enough. You’ve got to bring the process and the people, and it’s got to be done for the right reasons. And that’s the piece that’s been missing.

So it’s a little bit of education – but at the same time you want to look for those quick wins. Which is usually along the lines of, what are your pain points right now? And let’s see what we can do about those. But let’s do it in such a way that we don’t paint ourselves into a corner for the future, as we get to a more comprehensive, holistic approach to adopting technology.

Tax technology has anyway always been a journey. And particularly when you bring data into the picture. Because data is a constant thing, you’re trying to get your head around in a constant education process. And it’s probably for most people a process that once they get started on this process will probably last for the end of their careers.

The one constant in change is more change. So it’s probably going to keep going forward.