Since virtually every decision or transaction undertaken in a business has a tax implication, and since the digital transformation is leading to entirely new business models such as centralization of certain functions into regional or global shared services centers, tax needs to adapt— quickly—to align with and be relevant to the increasingly digital and automated enterprise. – Deloitte, Tax Compliance in a Digital World
Digital transformation has taken hold in businesses across the globe, with departments rushing to adopt digital-first approaches to drive efficiencies, gather new insights and cut costs. Digital transformation is a common topic among R&D, supply chain, operations, manufacturing and HR teams, but innovative tax teams are also welcoming digital transformation.
Often facilitated by technology-driven tax laws, this digital transformation of tax is nowhere more prevalent than manufacturing.
Global manufacturers are often among the first targeted by complex eInvoicing and eAccounting requirements, giving tax authorities visibility into every single business transaction. With complex supply chains, frequent cross border transactions, and often high value inventory, manufacturers offer governments a rich opportunity to improve tax collections by ensuring 100% tax compliance accuracy.
But these rigid regulations actually help manufacturers usher in the digital transformation of tax by requiring the centralization and standardization needed to automate processes. With these regulations, manufacturers running SAP can more easily extend their digital transformation efforts into the tax department to find efficiencies, increase accuracy and keep up with the changing regulatory environment.
What does digital transformation in tax look like?
- Centralization – To truly transform tax, businesses must have centralized processes and data. For multinationals operating in Latin America and, increasingly, Europe, this is already a prerequisite for efficient, accurate compliance with changing VAT regulations. Centralized oversight into VAT compliance reduces the risks of errors and manipulation, and technological adoption is the only way to achieve such centralization.
- Standardization – Since many countries are now requiring standardized eInvoicing and VAT reporting, multinational manufacturers also have a leg up on the second step of digital transformation – standardization. With standardized processes and data, companies can drive efficiencies and cost savings while developing greater insights into risks and liabilities.
- Automation – Automation is where the digital transformation of tax is truly transformational. Companies can automate routine tasks to increase efficiency and allow talent to focus on innovation. But the power of automation goes well beyond that. With data analytics and automation, tax departments can proactively identify problems and opportunities, becoming more valuable to the company as a whole.
Shared service centers are one way manufacturers are achieving centralization, standardization and automation to drive the digital transformation of tax. Download our Shared Services Playbook for a guide to adapting tax for proactive, future-focused global VAT compliance and reporting.