Managing indirect tax data in the digital age

EY Managing indirect tax data in the digital age

Data is the starting point and the end deliverable of every tax task. If companies do not seize the challenge to manage their tax data effectively, tax and customs administrations will. Tax administrations are becoming smarter, faster and more efficient at using data analytic tools to obtain, analyze and assess underpaid tax and duty amounts. In-depth reviews that once took from three months to two years to complete can now be done on a data-driven basis in a matter of weeks.

Dealing with indirect tax data is the key to effective indirect tax management. But the variety of indirect tax data required by different jurisdictions and the sheer quantity of relevant data generated by large organizations can present a range of logistical issues.



Having accurate global indirect tax data — and examining it critically — has never been more important. What is driving this trend? How can companies use technology to gain more visibility of their indirect tax position? How can they manage indirect taxes and associated costs more effectively? And why is this issue “front of mind” for today’s global companies?

Data is the starting point and the end deliverable of every tax task. If companies do not seize the challenge to manage their tax data effectively, tax and customs administrations will. Tax administrations are becoming smarter, faster and more efficient at using data analytic tools to obtain, analyze and assess underpaid tax and duty amounts. In-depth reviews that once took from three months to two years to complete can now be done on a data-driven basis in a matter of weeks.

Dealing with indirect tax data is the key to effective indirect tax management. But the variety of indirect tax data required by different jurisdictions and the sheer quantity of relevant data generated by large organizations can present a range of logistical issues.

With the increased reliance on indirect taxes and the “fair tax” debate putting companies’ affairs firmly in the spotlight, we consider some key challenges faced by multinational tax, trade and finance departments.
“Big data”: more and more information to gather, store and report

The drive for better indirect tax data

Having accurate global indirect tax data — and examining it critically — has never been more important. What is driving this trend? How can companies use technology to gain more visibility of their indirect tax position? How can they manage indirect taxes and associated costs more effectively? And why is this issue “front of mind” for today’s global companies?

External drivers

Governments are increasingly relying on indirect taxes to meet their budgetary needs
VAT rates have increased worldwide in recent years, and new indirect taxes are being introduced in many countries for sectors such as banking and energy

The “fair tax” debate has put companies’ tax affairs firmly in the media spotlight – drawing intense scrutiny not only from tax administrations, but also from regulators, investors and even the public

Tax and customs administrations are focusing more than ever on full compliance and using risk analytical tools to target their resources to tackle tax leakage and tax avoidance. They are collecting more taxpayer data and doing more with it

Internal drivers

Tax functions are facing external and internal pressures.
Businesses around the world are under pressure to improve financial performance. They are increasingly aware of the intense scrutiny they face from a range of internal and external stakeholders

They are asking more of their tax and finance functions. This includes:

Challenging them to reduce risks and meet the company’s obligations more effectively, using limited resources. These functions are being asked to go beyond tax compliance

Asking them to actively contribute to companies’ financial performance by reducing costs, facilitating processes and improving cash flow

Asking them to play an active role in the strategic decision processes providing financial and non-financial impact analyses

At the same time, corporate models are changing as multinationals standardize processes across entities and jurisdictions, and also as they rationalize structures and consolidate technology platforms and reporting systems. There is, however, little harmonization in the indirect tax compliance and trade information requested or the format for submission, which can make it difficult for centralized compliance and trade functions to meet these demands

Gaining visibility over the financial impact of VAT/GST related obligations, risks and opportunities is an important step to establishing an effective indirect tax strategy. It is often a precursor to building a business case for allocating resources, and for making decisions about outsourcing and investments in technology

Technology enablers

Advances in technology are creating new possibilities to reduce costs and increase profits. Enterprise intelligence tools are increasing visibility and control.

As corporations centralize their tax, legal and finance functions to reduce costs and increase efficiency, they are increasingly turning to technology to help them manage and measure tax performance

In recent years, advanced technologies, such as the Internet and mobile phone applications, have allowed indirect tax obligations to be completed, filed and managed using technology tools. Improvements in managing data can be achieved quickly through simple enterprise intelligence (EI) tools

High performing global traders focus on data

Trade compliance is critical to companies whose business is dependent on the international flow of materials and goods. The “trade function” within such companies, wherever it sits, is responsible for maintaining key trade master data (tariff classification, country of origin etc.) and for managing any third parties, such as customs brokers, that make customs declarations for the company. It is also responsible for ensuring that all exports and imports are correctly declared to the customs authorities

Trade data accuracy and improved trade processes further operational agility, improving supply chain speed and reliability, thus enabling accelerated response times
Trade functions add significant value through improved efficiency and operating cost reduction, actively looking for new ways to use big data to improve international trade processes, uncover cost reduction opportunities and manage relationships

Through timely collection and meaningful analysis, data can be used to quickly move away from traditional reactive support roles to more proactive and strategic positions