Why Trusted Data is Important in for Global Taxes

Data is the cornerstone of business, but as global corporations are faced with growing and disjointed volumes of data, what can the tax function do to become a trusted strategic driver of business value?

The phrase "Data is king" is often repeated among business leaders, but it only tells half the story; in reality, it's trusted data that reigns supreme.

Consider the volume and speed of data today: companies are collecting more information than ever before. As the shift towards real-time reporting reduces the opportunity to correct data quality issues retrospectively, the demand for complete, timely, accurate, and reliable tax data at the moment of collection continues to grow. Compliance with regulations is no longer merely a legal obligation but a fundamental necessity for the sustainability and credibility of any organisation. Non-compliance can lead to serious consequences, such as hefty fines, legal penalties, loss of investor confidence, and reputational damage.

A new era for tax compliance data

We are in a time of unprecedented change in the global tax and compliance landscape — exemplified by the OECD’s Pillar Two. With implementation now well underway, large multinationals are contending with the world’s first truly global corporate tax system, and it’s placing significantly greater burdens on their co-ordinated data collection and pan-global reporting.

Companies are faced with the task of gathering and transforming as many as 330 distinct data points for potentially hundreds of constituent entities for Pillar Two alone. However, Pillar Two is not the only emerging data challenge. Since 2021, the EU’s Corporate Sustainability Reporting Directive (CSRD), which requires large companies to report on their environmental and social impact, has compelled organisations to consider vastly more data points across the different functional areas of their organisation and supply chains. Many of these data points are not currently managed by existing systems or data controls indicating that many organisations’ data strategies, technologies, processes and systems are underprepared.

The CSRD directive has compelled organisations to consider vastly more data points across the different functional areas of their organisation. Many of which are not currently managed by existing systems or data controls indicating their data strategies, technologies, processes and systems are underprepared.

Renate de LangePartner, Global Sustainability Markets Leader, PwC Netherlands

At the same time, regulatory scrutiny is intensifying. Regulators and tax authorities are now demanding digital audit trails and increasingly leveraging technologies like AI to compare data sets and uncover discrepancies across filings, underscoring the growing importance of globally consistent data.

In theory, the Tax function can play a crucial role in shaping the entire data strategy from the outset. However, in practice, frequent gaps, errors and inconsistencies in the data inputs, mean that tax teams spend excessive time cleansing and manipulating the base data.

This can all be changed by demonstrating to the wider organisation the benefit of addressing data issues at the source. Providing an incentive to involve the Tax function in data strategy from the beginning, using regulatory change like Pillar Two as a catalyst, can drive transformation. For example, while certain aspects of the tax function will always be best managed by local teams, there’s no doubt that tax compliance in the Pillar Two era is more challenging for organisations with decentralised data and processes. Leading organisations recognise that, at the very least, they need much greater connectivity across domestic and global tax functions. This involves not only connected data, but also connected teams and insights. To achieve this, they incorporate the Tax function into their data and technology strategy at the outset.

The complexity of Pillar Two, the amount of data points required, and its calculation methodologies can be overwhelming. Companies need a trustful data strategy with a powerful calculation engine such as PwC's Pillar Two Engine to successfully deal with Pillar Two compliance, provision and modelling.

Doug McHoneyPartner, International Tax Services Global Leader, PwC United States

Quality data: How to address the challenge

Tax functions often face a disjointed data landscape, with information spread across multiple functions, systems and formats, which impedes efforts to achieve a unified view. Manual data entry remains prevalent, increasing the risk of quality issues flowing into downstream systems. Inadequate data controls and a limited understanding of the end uses of data exacerbate these challenges. Moreover, data challenges extend beyond collection. In many cases, data sets aren’t used consistently across different tax filings, heightening the risk of discrepancies. Data collected and cleansed for one reporting obligation often ends up being underutilised in others leading to inefficiencies.

So how are leaders rethinking their approach to obtaining trusted tax data?

They are tackling the trust challenge head-on. These leaders distinguish their approach by thinking holistically about the broader value potential of their data. They work to align the entire C-suite on the long-term goals they want to achieve and use this alignment to guide a coordinated trusted data transformation journey across multiple functions. This means that the Tax function is not addressing the ‘trusted’ data issue in isolation.

The value of data extends far beyond immediate compliance requirements. With instant access to connected data, organisations can uncover deeper insights and reveal unseen opportunities across the global business, allowing the tax function to take on an expanded role as a strategic driver of business value.

"The value of data extends far beyond immediate compliance requirements. With instant access to connected data, organisations can uncover deeper insights and reveal unseen opportunities across the global business, allowing the tax function to take on an expanded role as a strategic driver of business value."

Stan BeringsTax Partner, EMEA Connected Tax Compliance Leader, PwC Netherlands

But how are they actually achieving this? Here are our five steps for increasing your organisation’s trust in its data:

Creating consensus and buy-in across the C-suite, including from the CEO and CFO, about data strategy and operations across all aspects of finance, tax and sustainability reporting is crucial. Creating a cross functional team, centralising your tax processes, and structuring your data in a way that works for all jurisdictions, through a unified approach is key to avoiding ending up with a complex patchwork of inefficient solutions.

You can’t plan a transformation if you don’t know where you stand today. The journey must, therefore, begin with a robust assessment of your current data architecture, systems, processes, technology capabilities, and resources. This assessment is key in defining a future state that supports both day-to-day compliance and broader value creation.

Select data platforms and an architecture that enhances data quality and streamlines processes and technologies, including advanced engines for complex tax calculations such as Pillar Two. Additionally, consider co-sourcing or outsourcing operating models that leverage the latest compliance technologies to deliver improved outcomes more efficiently and allow you to access platforms and technologies without the need for direct purchase.

Investing in employee skills and capabilities is crucial for a successful data transformation. This should include training in data literacy and governance to foster greater trust in data assets, as well as equipping employees with the skills needed to work with new generative AI capabilities.

Trusted tax data is not about having perfect data at the source, which is often not realistic. Instead, it involves the ability to detect source data issues and provide tax teams with the analytics to continuously improve data and processes. With an ever-increasing volume of data, coming from different sources and in all formats (structured and unstructured), it has become increasingly difficult to just rely on traditional ways (without technologies like Artificial Intelligence (AI) and Machine Learning (ML)) of reconciling data and identifying anomalies. Detecting and preventing anomalies, reconciliation and continuous transaction monitoring including uncovering unknown patterns and risks using unsupervised ML methods, while also providing real-time key management metrics to drive deeper insights for the business is key.

Final thought

In today’s era of global taxes, being able to trust your data has never been more important. For the tax function, the leading practices outlined above can help build trust in the quality and integrity of data at the source — regardless of its origin within the business—and provide real-time visibility into data quality issues.

Operating a tax function based on disconnected data, technologies and teams’ risks undermining the trust that stakeholders need to have in organisations and will quickly lead to non-compliance with the ever-increasing complexity and real-time nature of compliance.

PwC can offer you the transformation, technology, data and people expertise to make ‘trusted data’ a core part of your organisation. Click here to find out more.