What’s your digital transformation strategy? Whether you’re in IT, finance, tax or the executive suite, if that strategy doesn’t include tax, you may be overlooking a huge source of risk – and strategic benefit. It’s time to consider launching a conversation about tax in a digitally transforming world. Which is why we’ve created the “Yes, Tax” conversation guide to help tax and IT navigate this journey together.
In this final installment of the Sovos “Yes, Tax” series, we focus on what is often the toughest conversation of all: How do we get started? And how we do it in a way that yields results and creates modern tax champions in your enterprise?
Here are a few conversational approaches you can use based on today’s tax and IT realities.
Q. What’s a good bet for a win in tax transformation?
A. Start with a capability that is about to become global table stakes.
Detail: Just as it will take some tax authorities time to become fully digitized, your transformation won’t happen in a weekend – nor will it be a one-and-done effort. But you can get ahead of the curve by introducing a capability such as e-invoicing compliance.
E-invoicing is a priority for many countries because it can help close the value-added tax (VAT) gap, a significant percentage of which often goes uncollected. Estimates suggest that in Europe alone, the annual VAT gap is nearly $150 billion USD. Because every country writes its regulations differently, however, it’s extremely difficult to comply in every country where you may operate.
The answer could be a global e-invoicing compliance solution. To succeed, such a solution must tick the boxes in a number of critical areas, even if your invoicing application is a third-party procurement or order-to-cash platform.
- Accounts receivable and accounts payable invoice management to ensure compliance
- Data extraction and mapping, so you map all the right compliance fields to the right XML schema
- Validation, so you can syntactically validate invoices to ensure the XML document meets local tax authorities’ technical specifications
- Automated printing, since legal invoices often have unique logo, bar code and signing data requirements
- Flexible end-to-end integration with any ERP, so you can automate the issuing and receipt of all invoices
- VAT reporting, so you stay compliant by using the same data sets of AR and AP processes
- Global transmission and government connectivity, so you can connect to dozens of tax administrations securely
- Invoice monitoring, so you have full visibility into invoice status, rejection notices, audit trails and attachments
- Guaranteed authenticity and integrity, so your invoices have digital certificates and are delivered by certified authorities that are accredited by local tax authorities
- Contingency management, so your business operations continue despite any government system failure.
Q. What about piloting a program in a single country?
A. Depending on the deadline, this could be a great way to go.
Detail: All of Latin America didn’t wake up to tax transformation overnight, so don’t feel obligated to boil the ocean right away.
How about an example like Turkey? Turkey introduced an e-invoicing framework eight years ago, and continues to add to its mandatory e-invoicing mandate with requirements for e-bank receipts, e-notes of expenses and e-producer receipts. Mandatory e-invoicing for companies doing business in the country now kicks in at any total above 5 million Turkish Lira, or approximately $840,000 USD.
Using a centralized solution to create a foundation in an e-tax-forward country like Turkey can allow your enterprise to collect lessons learned and best practices for future e-invoicing requirements landing on the books in other countries.
Q. If countries are emulating each other and sharing tax data, can we do the same thing from one country to another?
Detail: Obviously, replicating a digital tax approach from one country to another isn’t a cut-and-paste operation, but the general principle applies. A lot can be gained by leaning on solutions that take on board experiences in countries with similar regimes – avoiding the same mistakes every time a new country launches a requirement for continuous transaction controls is a powerful way to stay ahead of the competition. Government tax agendas and timelines increasingly overlap, and therefore create an important context for overall transformation timing.
Moreover, a modern tax solution can open your colleagues’ eyes about the interdependencies of tax and corporate applications like ERP. If you’re an SAP customer planning a move to Central Finance as part of your S/4HANA migration, your colleagues already understand the value of a centralized, cloud-based approach to managing and automation change management. As country governments put digital tax at the center of their finance operations, you can keep pace by starting now. Not to mention a modern tax solution could actually help streamline your ERP upgrades. Yes, a tax solution.
If you’re coming to this post first, check out the other two entries in our “Yes, Tax” series:
To find out more about Sovos and our approach to modern tax, talk to us. We’re always up for a good tax conversation.