Increasing globalization has significantly changed the corporate tax function, with constantly shifting regulations and stakeholder demands. In a recent report, “Reshaping the Tax Function of the Future,” PricewaterhouseCoopers (PwC) details several critical factors that will drastically impact the way companies do business worldwide – trends we’ve especially seen in the complex Latin American compliance landscape.
The big picture? Combined, improved visibility into all financial transactions and increased automation are helping companies pave the way to the Holy Grail of cost savings and risk mitigation. As we’ve discussed previously, the business-to-government mandates in Latin America are helping to speed up this automation and visibility.
Other highlights from the report include:
Government mandates are here to stay.
“Global tax information reporting requirements (e.g., CbCR and similar transparency initiatives) will grow exponentially and will have a material impact on the operations and related budget allocations within the tax function.
Country-by-country (CbCR) reporting is not the first transparency initiative, and it won’t be the last. But what makes the CbCR requirements stand out is the breadth of their reach and impact on taxpayers, tax authorities, governments and even the general public.”
As governments worldwide seek to maximize tax revenues, we can expect to see an increasing number of business-to-government mandates. With the success of e-invoicing in Latin America (for example, Mexico increased tax collections 34 percent in just its first wave of e-invoicing), other countries across the globe, including Russia, Singapore, Italy and Spain, are beginning to explore this model.
Risk management and governance are straining financial reporting now more than ever.
“Increased global compliance requirements combined with inefficient processes and over-reliance on spreadsheets will increase risk and drain already strained resources.”
Government mandates change at a rapid pace, and updating internal systems and processes to comply with these changes can be a complex and cumbersome process. As transparencies and information sharing increase, governments will also have the capability to sift through data and easily conduct global audits. The risk of error is high – with severe fines and penalties leveraged for tax discrepancies and errors.
As this pace of change only continues to increase, tax departments must find ways to streamline their operations and automate reporting processes to avoid costly mistakes.
Technology is changing how we manage financial reporting.
“The linchpin for real transformation is data. How data issues are solved will shape process change, which in turn will drive the resource model and the opportunities for value-added activities that contribute more strategically to the business.”
Proactive companies are realizing the efficiencies of better managing their data. From streamlined AP and AR processes to error avoidance, automation is helping companies to focus on innovation instead of manual financial processes.
As PwC explains, a corporate tax strategy and roadmap are critical for transforming the tax function. As business-to-government regulations become the new normal, planning now for future compliance measures is critical. Learn more about how Sovos is staying ahead of the curve, helping companies turn business-to-government legislation into opportunities.