Brazil is the world’s ninth largest economy and a country with a well-earned reputation of being perhaps the most complex tax environment on Earth. The sheer number of laws and mandates, the constant change and the risk of non-compliance resulting in significant penalties and fines is omnipresent. In this three-part blog series, we’ll look at the reasons behind the difficulties and explain how organizations are changing their approach to tax in Brazil to reduce their financial risks.
In part I of our series we talked about the reasons for the overwhelming complexity when it comes to tax in Brazil. In part II we are going to cover what companies can do to begin combating this problem.
Years of seemingly endless audits and financial penalties once left businesses feeling a bit helpless when it came to their tax predicament in Brazil. However, new processes, capabilities and approaches to tax are inspiring positive change for organizations operating here.
The digitization of tax created a new reality for businesses. The speed in which tax and regulatory authorities can make and enforce changes has increased exponentially. This has forced organizations to examine where tax fits into their corporate hierarchy. For many, this is no longer just a tax problem, it’s a business problem that requires an organizational approach.
As a result, organizations are now reevaluating how they implement technology, assessing when to involve tax as part of the discussion and working to determine if the current relationships they have with their technology partners are fully meeting their needs.
With any business transformation, changing the approach to tax will require input and support from multiple layers of the organization. As companies begin their journey towards greater efficiency and accuracy, they will depend on organizational buy in to change the culture and move towards a more modern approach to solving complex tax issues.
Let’s examine some of the key area’s that will play a critical role in the creating a new approach to solving the complexities that Brazil presents. These are the four elements that will determine the fate of your compliance journey.
- People: Who do you need to engage with? Who are the holders of the critical business and company knowledge required to solve your tax conundrum?
- Culture: Is corporate leadership bought in and engaged to transforming your tax management processes? Without that, creating a compliance minded culture becomes more difficult.
- Capabilities: What problems are you trying to solve and what are the new capabilities you are looking to create? How will these generate business value? You need to understand the scope of these going in.
- Process: What is the proper approach, what are the pain points and areas most affected by this added complexity? Prior to beginning your transformation, you must understand who is most affected and how you will manage the change.
Understanding how to align these four pillars to support your initiative is critical for ensuring a successful outcome.
Sovos recently hosted a webinar featuring João Cavalcanti, Director SAP Partner Solution Center from SAP; Uira Gomes, Global Tax Director from AB InBev and Paulo Castro, Brazil country manager, Sovos. The focus was on how to navigate the most stringent regulatory landscape in the world while undertaking the technology and compliance journey needed to meet the demands of modern tax environments. You can access the full webinar on-demand to hear directly from these experts on strategies, tactics and tools that will set you up for success. I would also encourage you to download the eBook for full explanations of these topic areas.
Now that we have covered the root cause of the problem and what elements your tax transformation journey needs to be successful; we’ll turn our attention to technology and partnerships in Part III.