Buying a tax engine for SAP is often treated as a foregone conclusion: regulatory pressure increases, SAP points to an ecosystem partner, and automation promises efficiency and control. Yet many organizations discover—too late—that the real risks were not technical, but strategic, operational, and governance-related.
Before selecting a tax engine, the most important work is not a product demo but asking the right questions.
1. What Problem Are We Actually Trying to Solve?
Start with brutal clarity. Are you trying to:
- Improve VAT/GST determination accuracy?
- Support real-time or near-real-time reporting?
- Replace fragmented local solutions?
- Prepare for e-invoicing mandates?
- Reduce manual effort—or reduce risk?
- Limited availability of tax codes
A tax engine is not a universal fix. Buying one without an articulated problem often leads to over-engineering, disappointment, or both.
2. How Many Business Models Do We Really Have—and Can One Engine Support Them?
In groups that have grown through acquisitions, tax complexity is rarely uniform. Different entities may operate:
- Distinct order-to-cash and procure-to-pay models,
- Different Incoterms, pricing structures, and ownership points,
- Localised processes built around legacy ERP systems,
- Country-specific workarounds that “just work.”
A critical question is whether you are buying a tax engine to harmonise these models—or to cope with them. Engines can technically support multiple business models, but complexity increases exponentially when tax logic must compensate for inconsistent processes rather than reflect a coherent target operating model.
3. Is Our Tax Design Stable—or Still in Flux?
A tax engine automates decisions based on predefined rules. In post-acquisition environments, this is particularly risky if:
- Integration is still ongoing,
- Temporary transition service agreements exist,
- Legal entities and supply chains are expected to change again.
Hard-coding transitional complexity into a tax engine can make future integration slower and more expensive, not faster.
4. Are We Using the Tax Engine to Hide Integration Gaps?
Tax engines are often introduced as a “neutral layer” to absorb differences between acquired businesses. Ask yourself:
- Are we fixing root causes or masking them?
- Would simplification of processes reduce tax logic complexity?
- Are we comfortable institutionalizing legacy behavior?
If the engine becomes the place where inconsistencies are resolved, it will quietly become the most complex—and fragile—part of your SAP landscape.
5. Who Owns Tax Logic Across Different Business Models?
In multi-model organizations, ownership becomes blurred:
- Which tax policy applies to which model?
- Who decides when two models should be treated differently?
- Are exceptions justified, or inherited?
If tax logic differs by acquired business rather than by conscious design choice, the engine will reflect organizational history rather than strategy.
6. How Does the Engine Handle Exceptions at Scale?
Acquired businesses often bring:
- Non-standard contracts,
- Local commercial practices,
- Data gaps and master data inconsistencies.
Ask how the engine:
- Handles overrides across entities,
- Tracks exceptions by business model,
- Distinguishes structural issues from one-off cases.
Without this visibility, exception handling quickly turns into uncontrolled risk.
7. What Is the Control Model—Especially Across Entities?
Auditors and regulators increasingly look for consistency across the group. Key questions include:
- Can controls be applied uniformly across business models?
- Can differences be clearly explained and documented?
- Can management demonstrate oversight at group level?
This becomes critical in IPOs, carve-outs, and refinancing events, where acquisition-driven complexity is scrutinised heavily.
8. How Dependent Will We Be on the Vendor to Manage Complexity?
The more fragmented the business landscape, the greater the risk of vendor dependency:
- Are rule changes manageable internally?
- Can newly acquired entities be onboarded quickly?
- Is transparency preserved as complexity grows?
If every acquisition requires vendor-led redesign, scalability becomes an illusion.
9. Does SAP Still Remain the Single Source of Truth?
In acquisition-heavy groups, the temptation is to let the tax engine become the consolidation point. Ask:
- Can SAP still independently explain tax outcomes?
- Can reporting span entities and models coherently?
- Can tax be reconciled without reverse-engineering the engine?
If not, operational control drifts away from SAP—and away from the business.
Final Thought
In organizations shaped by acquisitions, tax engines are often purchased to manage complexity. The hard truth is that they do not reduce complexity—they expose it.
The key question is not whether a tax engine can support multiple business models, but whether your organization is ready to govern them. When tax design, ownership, and integration strategy are clear, a tax engine becomes a powerful enabler. When they are not, it becomes an expensive archive of historical decisions—and a growing source of risk.
