Why BMO Business is focused on tech, women-led, and indigenous business

“There are three [business banking] areas that we’re really focused in on, and align really well with our purpose, which is to grow the good in business and in life,” says Dev Srinivasan, Chief Operating Officer for BMO Bank of Montreal Canadian Business Banking. In the second of three videos with Dev, he explains the common thread that unites technology, women-led, and indigenous businesses.

Dev Srinivasan: BMO focuses in on a broad group of clients; however there are three areas that we’re really focused in on, and aligns really well with our purpose, which is to grow the good in business and in life.

The first area would be technology and innovation. Toronto and Canada in general is really a growing tech hub. Toronto, Ottawa, and Montreal were three of the fastest-growing technology hubs in the world in 2018. This is a hugely important segment, and it is an area where we’re focused in on serving clients across the broad spectrum of their needs. We’re able to deal with venture capital companies that are really the life-blood of the tech space, as well as private equity and the companies themselves as they go public and grow faster.

Second would be women in business. Women-owned companies are growing faster than the overall market, and female entrepreneurs represent 60 percent of new business started. It’s a hugely important population, and we want to ensure that we’re supporting all groups. And if you look at our growth within the bank, we’re actually growing women-owned businesses at about 30-40 percent faster than we are male-owned businesses. So it’s a great opportunity for us to do well in the community, and also do well for our business.

And then finally indigenous banking – a hugely important population in the Canadian economy. BMO has served indigenous communities since 1992 with a dedicated team. This team really partners up with the communities in terms of understanding their unique needs, and ensuring that we’re delivering the services, the guidance, the expertise that is needed to help those communities thrive in a challenging environment.

Women in business, indigenous banking, and technology and innovation; very disparate in a lot of ways, but the common thread that ties them all together is the benefit that they bring to the Canadian population, to the community. And also the huge opportunity it represents from a business perspective. And that is one of the major reasons why BMO is focused in on this space.

How BMO can help your business maintain its competitive advantage

“The pace of technology – how fast it’s moving today – is having a dramatic impact on our clients,” says Dev Srinivasan, Chief Operating Officer for BMO Bank of Montreal Canadian Business Banking. In the first of three videos with Dev, he explains how BMO is adapting its processes and working faster, to make sure its clients can do the same.

Dev Srinivasan: The pace of technology – how fast it’s moving today – is having a dramatic impact on our clients.

When you think about how quickly now competitive advantage can be taken away through technological advancements, it’s impacting not only BMO’s clients, but the bank itself. And the pressure is really on for banks globally to really up their game, and ensure that they’re serving clients in a way that is allowing them to keep their competitive advantage.

At BMO, we believe that we are an incredibly strong business partner in this sense, and the advancements we’ve made allow our clients to keep their competitive advantage, and allow them to continue to win in the marketplace.

A great example of how BMO is responding to the change and the technology advancements out there is what we’re doing in the small business space right now.

It used to take the same amount of time to get a $100,000 loan approved as it would a $10m loan. And now what we’re able to do – through Business Express, our platform – that allows us to approve small business loans under a million dollars in under 30 minutes. It’s a huge advancement, and it allows our clients to really move with the pace of technology, and allow them to move ahead of their competitors.

BMO is also updating its processes. When you think about the amount of time that used to be taken by administrative activities, we’re now able through the use of technology, we’re able to reinvest in terms of client service, ensuring that our relationship managers are front and centre with clients, understanding the industries, and ensuring that we’re helping them move along as quickly as possible.

BMO wants to be seen by our clients as somebody that is relevant in the industries that they operate. So a couple of things that we’re doing on that front. We’ve really focused in on verticals that are truly impacted by technology, and the change, and the speed of change. So as a for instance, we’ve focused in on technology and innovation; we’ve created an entire vertical focused on that. And it’s able to serve companies from start-up, all the way up to going public, with the full suite of products and services that traditional banks actually would have a challenge in delivering.

How Nigeria’s Access Bank is strengthening governance for the digital age

In April 2019, Access Bank merged with Diamond Bank: now with 29 million customers, Access is the largest bank in Nigeria by customer base. And as well as transforming its customer-facing processes, it’s reforming its corporate governance and compliance framework to keep up with the technological challenges of banking in the modern age. We have two more videos from this interview: about the changes Access Bank is making to serve its more-than-doubled customer base, and its sustainability projects.

World Finance: Tell me about your corporate governance practices; now you’re such a much larger bank than before, this must be increasingly important.

Herbert Wigwe: Extremely so. We have – apart from the traditional things, and the four eyes principle, there’s also – clear delineation of duties. We basically comply with the code of corporate governance by the Securities and Exchange Commission, and by the central bank. But we go far beyond that. Even the board committees look at things to do with technology, with cyber security: because it’s a brand new world. Now data is the new currency! It’s no longer the bank vault.

Now, compliance is a big thing, today in the world. We are beginning to strengthen our entire compliance framework: working together with our subsidiary out in the UK, we are making sure that all subsidiaries are compliant with the global compliant standards. Because the bigger you are, the more you are subjected to scrutiny in the different geographies in which you have a presence.

So it’s changing our thought process, it’s changing the way we look at life, it’s changing the way we look at the world. It’s also enabling us to anticipate the great changes that can come even out of technology that may disrupt our business. And enabling us to be the first to disrupt the business if any such thing was going to happen.

World Finance: You personally must be a lot busier now with the new Access Bank; tell me about your priorities at the moment.

Herbert Wigwe: First of all it’s people: any business is founded on strong people and people management. I mean, irrespective of what you do with technology; it’s people at the end of the day who run all of these things. So that’s the first one.

The second is technology. We were lucky in the deal with Diamond, in the sense that we had the same technology platform. But sometimes getting systems to speak to themselves, so that you don’t disrupt the customer, keep their account details the same, etc – may not just add up immediately. I think it’s going on well, but it remains a challenge.

And thirdly, there are larger issues that have to do with infrastructure. So I’ll give you a simple example. If they switch network, or if there’s an issue across the country: it will affect us, because we have the largest customer base! At 29 million customers it means that one out of every three transactions settles on your platform: at the slightest issue, you feel it more than anybody else.

Now, these are issues that we didn’t have to deal with in the past. But resolving them is the most important thing. Creating the fallback situations, creating backstop arrangements, to ensure that if there’s a problem with the systems somewhere, your customers can also transact their businesses without feeling that hitch.

You know, it’s an interesting time for us.

World Finance: When we met two years ago, you expressed at the time a very strong personal responsibility to the country. Now as you say, one in three transactions landing on your platform: do you feel a greater responsibility than ever to the country and the continent? How are you seeing that reflected in Access Bank moving forward?

Herbert Wigwe: More than ever before. I think with 29 million customers, I begin to understand the impact of our actions on the country. The impact of whatever we do from a digital standpoint, in terms of our contribution to the GDP.

You know, we have 200 million people. We have maybe 50 million unique bank accounts. It means that there’s a market of anywhere between 60 and 70 million that needs to be brought into the formal sector.

What we’re trying to do is to make sure that we use digital to support them – even the bottom of the pyramid. If we can help them, that can begin to have so much impact on our country. One, in terms of financial deepening. Secondly, in terms of the funding and liquidity profile of banks. Thirdly, in terms of the sustainability of the financial services institutions. Fourthly, in terms of the contribution to the GDP of our country.

SMEs, micro-SMEs, represent the bedrock of the economy. And if we begin to serve them more and more and more, it can change our country totally. And I feel a strong responsibility to do that.

World Finance: Herbert Wigwe, thank you very much.

Herbert Wigwe: Thank you very much, Paul.

Access Bank CEO: ‘Doing business responsibly and sustainably is the only way’

When Herbert Wigwe first created Access Bank, his ambition was to create the most respected bank in Africa. He explains what this means: in terms of expanding financial inclusion in Nigeria and the rest of the continent, supporting women entrepreneurs, and helping launch Nigeria’s Sustainability Banking Principles. We have two more videos from this interview: about Access Bank’s improved corporate governance practices, and what it means to be Nigeria’s largest bank by customer base.

World Finance: When you created Access Bank, your ambition was to create the most respected bank in Africa…

Herbert Wigwe: Absolutely.

World Finance: …financial inclusion, sustainability, obviously extremely important for that; tell me about your sustainability goals.

Herbert Wigwe: I think for us, sustainability is a very important part of our business. Issues that have to do with people, planet and profits – very, very important. So we – together with the Central Bank of Nigeria, several years ago – launched the Nigerian Sustainability Banking Principles. And I think for several years we have been at the lead of it.

Things that have to do with gender balance; we started supporting female entrepreneurs, we introduced things like the maternal healthcare scheme – things which are not very normal, in the context of the continent.

But apart from that, I think the most recent aspect – which gives us a lot of pride – is the fact that we launched a green bond. And that green bond is Climate Bond Initiative certified – it’s the first in the continent.

And the more we do these things, the more we think other corporates will take a lead – and therefore lift up the continent as far as sustainability is concerned. And I think if you keep us side-by-side, most institutions in the continent and world over, I think we’re exactly where we want to be.

World Finance: As you say, supporting women has always been very important to Access Bank – how has that evolved over time?

Herbert Wigwe: When we first started this whole initiative, we initially thought about supporting women financially: professional women, women who were entrepreneurial. And we said, we wanted to take 20 women from zero in terms of turnover, to NGN 1bn in terms of turnover, over five years.

And over the five years – you know, from 2006-11 – I think we did very well.

But we then went and sat back and said, look. This whole thing about gender support can be done differently. There’s so much more apart from finance that we need to give. Finance is important, but it’s not everything.

So we emerged into what we referred to as the Access Women Network. This was about creating a forum where we inspire, connect, and empower women. We created portals through which women could be supportive of themselves. We created portals where we could support women – for instance, if you needed an accountant, you could get an accountant to look at your books at rates that were subsidised. Because for a lot of them who were becoming entrepreneurial, they needed to be taught a bit more in terms of the basic things around accounting, and all of that.

And then we deepened our capacity-building as far as this was concerned. So twice a year we would take women and train them. For those who are at the beginning, early stages of their business, support them from a capacity-building standpoint. For those who were a more mature level, teach them about issues around succession planning for their businesses.

So that was what Access Women Network was built around. And I think today it’s got to a mature stage. We have tens of thousands of women who are part of that network. They meet at different points of time in the year, discussing the typical issues that their gender has to deal with.

World Finance: How does your mission inform what you do? Both in terms of the services that you’re offering to your customers, and also across the continent – working across borders and building your brand?

Herbert Wigwe: Our mission is very simple: it’s setting standards for sustainable business practices. Unleash the talents of employees. Deliver superior value to our customers. And provide innovative solutions to the market and communities we serve.

And what that does, simply, is to say: we will do business, but we will do business responsibly. We will do it sustainably. And it’s something we have been celebrated world over for, and we remain extremely proud of it. So it may not be the most profitable thing in the short term – defined in strict financial terms. But in the larger sense, and looking at it over time, doing business responsibly and sustainably is the only way to live.

Access Bank accelerates retail operations after Diamond Bank merger

Access Bank is now the largest bank in Nigeria by customer base, following its April 2019 merger with Diamond Bank. Herbert Wigwe is Access Bank’s group managing director and CEO; he discusses what the different brands brought to the table, and how the bank is completely transforming its processes to provide the same high levels of service to its now more-than-doubled customer base. We have two more videos from this interview: about Access Bank’s sustainability projects, and its improved corporate governance practices.

World Finance: Access Bank is now the largest bank in Nigeria by customer base, following its April 2019 merger with Diamond Bank. Herbert Wigwe is Access Bank’s group managing director and CEO; Herbert, why the merger? What strengths do the different brands bring to the table?

Herbert Wigwe: First of all, the idea was for us to show the world that coming out of Africa we can create truly global institutions that are digitally led, that are basically reaching out to the bottom of the pyramid.

In terms of the strengths that the different institutions brought, Access Bank on its own had built a strong wholesale business. It had also built a very strong treasury business and was known for strong risk management.

Now Diamond Bank catered for a different end of the market. The micro-SMEs, individuals; it was a very strong digital institution that had about 17 million customers.

What did that do for us? It created an institution where we could serve the large corporates and, using technology, basically ensure transfer of goods and services all the way to the last mile.

But I think the most important for me is the fact that this merger, it would help ensure greater financial inclusion, greater financial deepening, and ensure that in the 200 million -strong people in Nigeria we can basically start to have about 100 million that are financially included.

World Finance: So, how many customers does Access Bank have now, and how is that changing the way you’re having to provide services?

Herbert Wigwe: We have 29 million customers. It’s a totally different ballgame!

So we’ve had to change from being a wholesale bank that would have just put up the large corporates, or the middle corporates; to ask ourselves, ‘What do we need to do, to make sure that payments happen seamlessly?’

Digital is the way to go to reach the bottom of the pyramid. So in the last corporate strategic plan, we said we wanted to become a large, diversified bank. And that was when we started creating a digital banking division. And the whole essence was to use digital means to start to expand our retail proposition. And it was successful.

But in the one that just started, in 2018, retail is much more important. Because we need to address some of the liquidity and funding pressures that we may face as we grow. We need to start creating a global institution in terms of scale; we need to create one that is digitally led, because that is the only way for it to happen. We need to make sure we’ve created one that is scalable, one that is also founded on very strong risk management and other governance frameworks.

World Finance: Give me some examples of the kinds of technologies and innovations that you’re bringing to market.

Herbert Wigwe: One is Access Africa. Access Africa enables us to do a couple of things. First of all, it enables diaspora flows to come into the continent much more easily. The second is that Access Africa enables us to help in settling intra-African trade – and it’s encouraging it. So whether it’s trade between Nigeria and Ghana, Nigeria and Benin, Nigeria and Togo: people can do those things instantaneously. Third, it enables us to basically do some of the things with respect to supporting international trade. This used to be the terrain of the large international banks that left the continent.

We have something called QuickBucks, which enables people to access funding instantaneously. And I’m not talking of 10 minutes, I mean on the minute. And we’re creating those algorithms that allow SMEs and micro-SMEs to be able to borrow instantly – again, of course, taking risk into consideration.

We also have what we call Tamada, which is our own chatbot. And enables people to transact and do whatever they do, through this chatbot. And this is being resolved as if it is a real-life person.

These are some of the things that we’ve brought to the market. And I’m not just talking about Nigeria here – it is happening in every country in which we have a presence. So, those are the big things we’re doing from a technology standpoint.

New Baiduri Bank CEO pledges more investment in technology and training

Baiduri Bank – the largest conventional bank in Brunei – has appointed a new CEO. Ti Eng Hui has been with Baiduri for the last 20 years, with the latest five spent in key management positions. He explains how he views his mission as he takes over the helm, the lessons he’s learned from outgoing CEO Pierre Imhof, and his ambitions to grow the bank internationally in the coming months.

World Finance: Mr Ti, talk me through the growth and the evolution that Baiduri Bank has seen over the last five years.

Ti Eng Hui: As you know, Baiduri Bank has three core businesses – one of which is retail banking, which has gained significant marketshare over the last five years in mortgages, in personal loans, and credit cards. We also have a core business which is corporate banking – servicing small businesses, all the way to multinational companies.

Another, third, core business, is our hire-purchase arm: a subsidiary company called Baiduri Finance, which specialises in car hire purchases and leasing. So all three core businesses have been doing fantastically well over the last three years.

Over the last three years we’ve had the opportunity to acquire a number of acquisitions – one of which is the UOB portfolio, the retail portfolio that we brought over. So that has given us a tremendous boost in the retail business. 2017 was another good year for us; we brought over HSBC’s retail and corporate portfolio. It’s given us another boost, in terms of assets and profitability by another 10 percent.

Our profit last year has grown by 29 percent, and our total assets have grown by 12 percent.

World Finance: So, what do you see as your mission, as you take over the helm?

Ti Eng Hui: You know, Baiduri has been successful over the last 24 years: this year is our 25th anniversary. And I would like to bring the bank to a new level of service, a new level of capabilities, and a new level of productivity, to meet the challenges in the coming years.

That means building up new capabilities. That means bringing new people to strengthen the team. That means bringing new technologies to support the business; to make sure that we bring new services to our customers. We make sure that the innovation in banking continues to be rolled out.

We need to make sure that our management team will continue to deliver in the coming years, and that we have a good succession plan in place.

Lastly, we need to be more nimble. We need to be able to go forward in such a way that we are able to respond very quickly to the changes in the marketplace, and to be able to take advantage of the opportunities in Brunei and abroad.

World Finance: You’re taking over as CEO from Pierre Imhof; what’s the legacy that he’s left behind?

Ti Eng Hui: Well, you know: Pierre was the CEO for 16 years, and I was fortunate to be his deputy for five.

I’ve learned a lot from him over the years. I think he has a very special skillset in managing conflicts among people. He’s able to bring stability to the bank, to bring growth to the bank. And I think he is a great people manager, able to motivate people to do their best, give people the opportunities to do what they believe in, and best of all, trust his people in delivering what they’re supposed to do.

The bank has been fortunate to have him over the last 16 years, so thank you Pierre, for his contribution.

World Finance: Baiduri Bank has a long history of delivering financial services firsts in Brunei; how will you make sure the bank continues to stay ahead of the competition?

Ti Eng Hui: Well, there’s two things we need to do. One is that we need to continue to invest in technology. New technologies like cloud computing, like fintech, like big data: these are very important tools that we need to have to propel the bank to the next level.

Secondly, I think we need to train our people a lot more. There are new regulations, the banking industry is facing new challenges. So we need to make sure our people are well trained, well positioned, to be able to face the challenges in the coming years.

World Finance: So, in the coming years, in the next five years: what is your ambition for Baiduri Bank?

Ti Eng Hui: You know, Baiduri Bank: it’s a Bruneian bank. It is a bank serving the Bruneian community. It is a bank that will continue to focus on Brunei as a priority market. We will work a lot more with government linked companies (GLCs) to serve them better. We will continue to work with the business community to develop more corporations.

We want also to be able to venture outside of Brunei – and therefore we have plans to go beyond Brunei. And that means developing a strategy for our expansion in a number of Asian countries. So that’s something that we will be working on in the coming months.

World Finance: Ti Eng Hui, thank you very much.

Ti Eng Hui: Thank you for inviting.

How blockchain can be used in tax compliance | Vertex Exchange Europe 2019

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.

 

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Technology trends in tax compliance | Vertex Exchange Europe 2019

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.

 

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How tax engines ease the compliance burden | Vertex Exchange Europe 2019

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.

 

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EU VAT changes for eCommerce businesses | Vertex Exchange Europe 2019

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.

 

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Common pitfalls of tax process automation | Vertex Exchange Europe 2019

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.

 

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The next stage of tax automation | Vertex Exchange Europe 2019

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.

Tax compliance changes driving automation | Vertex Exchange Europe 2019

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.

Emmi Nygard: So, my job at KPMG is to run a team that does tax technology implementation. So, specific to O Series, to VITR, and the TPE tools that are on the market. And so I often help clients decide what they really really want for the automation of their tax design and their tax process.

I think one of the biggest things is that we see compliance rules changing day-to-day almost! And we’re seeing that kind of change coming very rapidly. And so they’re seeing the need to put a tool in place that they can then automate this process – but also be ready for what’s coming next.

Most processes, if they’re looking to automate them, are manual. So those look like Excel documents, quite honestly! It’s a lot of cutting and pasting and bringing things together from different sources. A lot of clients have different and disparate source systems. So they have to come up with a different way of doing that. And when you look at an automation tool, that’s actually when you go to put that into place. Especially if they have multiple systems and multiple sources of information.

Overarchingly the hope is that it frees up the time of the tax professionals who’ve been doing this manual work that isn’t really adding value to the business itself, to then be – as we say – value add for the actual business. So that they can find other ways of being prepared for tax audits, finding new and creative ways of doing some of their tax work.

But really what I think they’re ultimately going to be able to get out of this is that they can free up their time to make sure that their people who are tax professionals are actually using their time for the best tax outcomes for the business itself.

The conversations I’m having here are both around the product, and ways that we see our clients using Vertex products today, and the ways that we could probably make them a little bit better. Because the whole idea is to iterate and keep making changes so that our customers are using these more and more. And we’re really trying to evolve them with the changing trends.

But the other ones on the other side are clients who are really looking at the possibility of implementation, and I was just having a conversation with some of the guys around misinformation that’s being provided by other software providers out there. Where we recognise that there’s still some level-setting to be done in Europe around how these tools work, what the real offerings are, and how as an advisor I can bring that to the table, so that they can look to Vertex, they can understand that they can use these tools, and how they can do that.

Five or 10 years ago I would say that companies were really looking at the possibility of automation, rather than jumping right in. And now they are actually making that leap into the next phase – and they’re seeing a need to actually implement these technologies. They’re really looking at these tools as a way to help their tax organisations jump into the future. And the reason that they’re doing that is they’re seeing legislation change day-to-day, month-to-month, year-on-year. We’re seeing more and more requirements come down the pipe, that they’re having to actually adhere to. Things like the SAF-T, things like real time reporting. And all of those things are saying you have to get it right, right now. There is no tomorrow.

So I think that’s what we’re really seeing in Europe: it’s that where the US was maybe 10 years ago, we’re there now. We’re really moving that forward, and we’re seeing automation as the next phase.

 

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Digital Service Taxes and how to challenge them | Vertex Exchange Europe 2019

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: Digitalisation and new business models have created enormous challenges for international taxation.

We are at the crossroads. Several fundamental questions remain unanswered. How to tax digitally operating companies? Where to tax them? What to tax: profit, turnover, data, intangibles, user participation?

The OECD is driving the international debate on taxing the digital economy. It’s looking at various proposals, how to change the current tax system, hoping to bring 125 countries to a consensus.

We have been searching for a solution already since 2013 – and no solution has been found so far.

Some countries became impatient. They started thinking about implementing temporary measures to tax digitally operating companies. And one of the common temporary measures are digital services taxes.

Digital service tax proposals have been announced in many European countries: in France, in the UK, in Austria, Poland, and the Czech Republic – just to name a few. They are intended to be temporary measures; but if there is no global solution, they will become permanent. And the history of income taxation is full of temporary measures that became permanent.

So what will happen when we are faced with digital services taxes? Without a doubt, this will mean a huge compliance burden on companies.

Digital services taxes apply to turnover, not to profit. So you may generate losses in a country, but you’re required to pay those digital services taxes. And of course a question that many companies will be asking is, what to do about them? Are there any ways to challenge them? And yes there are – some of them are easier than others.

For example, there are good arguments to claim that digital services taxes would operate as de-facto tariffs, violating the WTO law. That means a country – for example the US – can make a WTO claim against the country that has introduced digital services taxes.

WTO cases and procedures take quite a lot of time to be resolved, so it may take two years or more. But there are also ways to challenge digital services taxes under EU law. There are good arguments to claim that these taxes violate the state aid rules and the fundamental freedoms.

State aid means benefits granted by governments on a discretionary basis – so it’s about selectivity. You cannot favour certain companies or certain sectors. And digital service taxes are all about selectivity. They apply only to big companies, and they apply only to certain activities.

The fundamental freedoms forbid discrimination based on nationality. Digital services taxes do not refer explicitly to nationality – but they refer to thresholds. They affect big companies. And big quite often means foreign. And that would mean that the prohibition on nationality discrimination is violated.

So there are ways to challenge digital services taxes. Some of the ways may be more simple than others, and what will happen in the end? We just have to wait and see.

 

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Applying tax engine rigour to procurement | Vertex Exchange Europe 2019

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: There are trends in procurement at the moment, and actually it’s about best-of-breed platform. I suppose traditionally procurement has always happened in ERP platforms – and not without difficulty for VAT, for sure. But now there are platforms such as SAP Ariba, such as Coupa, becoming very popular with procurement.

As VAT people, we’ve always had a much clearer handle on the AR side of our business – the sales that we make. We are in control of that.

By definition we are less in control of the AP side of our functions – we are at the mercy of the vendors, of the clerks managing the invoicing for those vendors.

AR clerks from our vendors are literally manually typing VAT amounts into a screen in front of them. What are they basing that VAT amount on? Well, your guess is as good as mine. But with manual input becomes risk of manual error.

This is where the use of a tax engine can apply rigour throughout the lifecycle of an AP process. The content, the power of automation and consistency that you get with a tax engine can ensure that companies aren’t accepting incorrect invoices – or, invoices with incorrect VAT on them – to ensure that they know the true cost of VAT to their business, to not be so much at the mercy of AR clerks.

One of the key business outcomes of applying this kind of rigour to AP is simply not accepting invoices on which the VAT is incorrect! As we know, if you as a business accept an invoice with incorrect VAT, and you recover that VAT, well there’s a chance that you’re going to end up being liable for that VAT.

We often find these errors years down the line, when the tax authorities come and ask the right questions. What we’re looking to do with tax engines is to apply that rigour up front, real time: to weed out those incorrect invoices at source, not accepting them by chance, and living to regret it sometime later.

So for example I know I’ve worked with some businesses that went through an exercise of applying rigour to their AP process. And at the start of that process they believed they were getting 65 percent of their AP invoices correctly coded. By applying rigour, working along with Vertex, they upped that to over 95 percent fairly rapidly.

 

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