Unlocking opportunities through tax compliance transformation

Courtney Brown Partner, Tax Reporting and Strategy, PwC Canada March 08, 2022

How reimagining your approach to direct and indirect tax reporting can help maximize the value of your compliance program.

Direct and indirect tax compliance is becoming more demanding for businesses worldwide. Tax authorities are overhauling how various taxes—including corporate tax, VAT, GST and other sales taxes, customs and excise duties, property taxes and environmental taxes—are reported and collected, and businesses are leveraging real-time reporting to facilitate compliance and reduce fraud. That’s putting pressure on businesses to strengthen their tax governance practices and how they manage their tax information—a message reinforced for some organizations by the Canada Revenue Agency’s renewed efforts to identify eligibility and payment errors in pandemic relief programs such as the Canada Emergency Wage Subsidy.

This evolving landscape presents potentially significant risks for businesses, particularly those that rely on spreadsheets, manual activities and decentralized processes to prepare their tax information. The time spent responding to audit queries alone can quickly become a considerable expense even before considering potential financial penalties and the accompanying reputational damage.

But we’re seeing some organizations mitigate these threats and gain a competitive advantage by enhancing their tax and compliance management programs. They’re digitally transforming their tax strategy to include better data management, increased automation and improved workflows—freeing employees to focus on higher-value activities that build trust and maximize the value of their compliance activities.

Top pain points

What would you consider your top pain point among the following options? Consider “pain point” as “manual effort” and “time consuming.”

Source data transformation

Manual effort in spreadsheets

Timely review of work and risk management

No workflow automation and too many emails

Source: 2021 PwC Canada client survey, sample includes 118 respondents from 62 Canadian organizations

Creating more efficient tax reporting processes

Digital tax transformation is increasingly on the agenda of Canadian executives. There’s growing awareness of the large returns on investment that can be realized through efficiency improvements and reducing the risk of manual errors.

Our client surveys show many organizations are exploring a rethink of their tax functions, with an even greater number enabling their journey through small automation and transformation projects.

Regardless of where your organization is on its transformation journey, there are several key approaches that can help you mitigate risks, reduce costs and unlock new organizational insights:

Tax transformation maturity in Canada

Quick background and overview of the Canadian landscape

Absent

Exploring

Enabled

Transformed

Source: 2021 PwC Canada client survey, sample includes 118 respondents from 62 Canadian organizations

Define your digital tax transformation roadmap

Building out a 12- to 18-month strategy and roadmap is the starting point for most organizations. This should be a collaborative process involving tax, finance, accounting, risk and IT working together and sharing knowledge.

It’s often beneficial to think big, but start small. Look for low-complexity quick wins that open new opportunities, such as restructuring data in a way that allows you to eventually adopt automation technologies. Deliberately expanding your efforts over time—and celebrating your successes along the way—helps build awareness across an organization and maintain your momentum.

Create a data strategy

A data-driven culture is a key—but often overlooked—component of digital tax transformation. Building this culture can start with identifying, transforming and standardizing 80% or more of your source tax data as well as investing in enterprise-wide data acquisition tools. This allows for strategic real-time reporting and an educated, proactive approach to automation which reduces the time tax specialists spend manually requesting and reworking information.

Expand tax technology beyond spreadsheets

Many tax functions devote a significant amount of time to manually tracking and reworking spreadsheets. This is especially true when calculating and adjusting tax provisions, reconciliations, regulatory reporting as well as monthly, quarterly and annual filings. Alternative technologies, such as data preparation, blending, visualization and analytics software, robotic process automation, optical character recognition software, document management and tax workflow automation platforms reduce the need for manual inputs and processes. This saves hours of staff time and helps mitigate risks through increased controls, improved governance and real-time oversight of tax documents and activities. They also allow organizations to keep key data accessible and centrally stored. This helps facilitate business continuity in the event of, for example, a key tax leader leaving your organization.

Upskill your tax professionals

Investing in technology is a fundamental part of digital tax transformation. But that technology is only as good as the data being ingested and the people working with it every day. Incorporating change management initiatives and applied training in your journey helps tax specialists better understand how they can apply technology and automation to their daily tasks. This allows them to find efficiencies and opportunities for higher-value compliance activities.

Digital transformation is powered by technology, but led by humans. This makes it important for any organization to have a champion who’s reviewing the automation processes, coordinating and defining workflow processes as well as identifying opportunities for updates as the business evolves.

Maximizing value

Organizations that successfully replace their reliance on manual data management with improved and automated workflows are often able to work with greater speed, accuracy and transparency. These efficiencies can help reduce costs by decreasing the time employees spend responding to audit-related queries or recalculating tax provisions. But that’s only one part of maximizing the value of a transformed approach to compliance.

When freed from many of their manual tasks, tax specialists have more time for tax recovery reviews and other higher-value work, such as understanding the implications of global and domestic tax changes. And by giving employees this opportunity to engage in more meaningful work, organizations can improve staff retention and build a more skilled and experienced workforce.

We’ve seen powerful outcomes when organizations combine technology, strong governance practices and an upskilled workforce in their transformation journey. Tax specialists become better positioned to drive new sources of value from their compliance programs and proactively prevent risks from materializing. Which, in turn, helps business and tax leaders realize another coveted source of value: peace of mind.