Headline Verdana Bold Deloitte TaxMax The 43 rd series Richard Mackender & Senthuran Elalingam l 22 November 2017 by Deloitte Tax Academy
Agenda The Digital Economy 3 Background and market research 8 Managing tax challenges using technology 13 Leveraging emerging technology 20 The journey 25 Q&A 27 2
The digital economy 3
The digital economy Development 2 3 4 5 Increasingly becoming the economy itself Accelerated and changed the spread of global value chains Business models have changed and are changing 1 The spread of ICT across (traditional and innovative) business sectors A result of transformative process brought by information and communication technology (ICT) 4
The digital economy New and dynamic business models 5
Digital economy: direct tax issues Taxable nexus Income characterisation Profit allocation Remote supplies of goods and services PE / source Novel approaches Technological developments Royalty vs. service Withholding taxes High value intangibles R&D Transfer pricing: DEMPE* functions and risk assumption * DEMPE - development, enhancement, maintenance, protection and exploitation of intangibles 6
Digital economy: VAT issues Global VAT / GST developments Final international guidelines published by OECD on 12 April 2017 B2B Endorsed by Global Forum on VAT on 18 April 2014 VAT / GST guidelines OECD Working Party 9 B2C Endorsed by Global Forum on VAT on 6 November 2015 Includes recommendations to implement principles from VAT / GST guidelines BEPS Action plan 15 Actions Action 1: digital economy Final BEPS package endorsed by OECD / G20 in October 2015 7
Background and market research 8
The evolving tax landscape Driving change in the tax function Resource new skills required Business globalisation more obligations, greater economies of scale Technology new risks and opportunities Technology and resource Tax environment Economic events Responsible tax more stakeholders and scrutiny Tax authority approach New legislation Tax authority transformation using and sharing data Increased legislation more rules, complexity 9
Market research Views from the Head of Tax % of respondents satisfied with current state Satisfaction levels are at an all time low Particularly in terms of process efficiency 60% 40% 20% 0% 58% 55% 42% 43% 50% 58% 36% 37% 34% 34% 33% 34% Maximising quality Guaranteeing control Ability to add value Managing costs 45% 26% 16% Process efficiency 2016 2014 2012 Anticipated importance of drivers over next three years 80% 60% 40% 40% 40% 57% 53% 52% 45% 41% 40% 63% 56% 54% Tax functions feel happy with levels of quality 20% 0% 28% 38% Decentrliased functions Coordinated functions Centralised functions Quality Control Ability to add value 38% Cost Process efficiency Control and process efficiency are areas of focus 10
Market research The potential of technology Many businesses see high potential benefits using technology in different areas of tax. 66% 64% but few are actually realising those benefits 40% 32% 20% 22% High current benefit 14% 12% High potential benefit Source: Deloitte Global Market Research, 2016 Process efficiency Quality and accuracy of data Risk management Planning and business decision making 11
Tax technology today 12
Managing tax challenges using technology 13
Example tax technology considerations Challenges Characteristics of enabling technology Significant volume of data Regular, time consuming processes ERP sensitisation Data validation Errors from manual manipulation Reliance on non-tax personnel Process automation Audit trail Tax authority focus on data quality Visibility over global compliance Workflow Document management 14
Example tax technology considerations Dashboards myinsight A global tax platform, providing Deadline, process and documentation in one place Data aggregated for quick access to everything you need Maintained global tax deadline content across multiple regimes Global dashboard reporting Standard process workflows 15
Example tax technology considerations GST analytics Indirect Tax SMART Deloitte Indirect Tax SMART supports the end-to-end standardised indirect tax compliance Uploads and consolidates data Data cleansing through Pre- Agreed Adjustments (PAA) Data quality checks (DQC) and exception reports Return generation and submission Full audit trail Management reporting based upon structured transactional data 16
Example tax technology considerations CbCR analytics Country-by-country Digital exchange (CDX) Risk assessment on CbCR data to be provided to tax authorities, including analysis such as: Effective Tax Rate (ETR) and Cash ETR Percent of related revenues to total revenue Number of employees versus: Unrelated party revenues Profit before tax Stated capital Tangible assets 17
Example tax technology considerations Business Traveller 18
Tax technology architecture 19
Leveraging emerging technology 20
Emerging technologies Robotic process automation Blockchain Big data Emerging technologies AI Cyber & data privacy Cognitive computing 21
Robotics in tax video 22
Robotics in tax examples 23
Implications for the tax operating model Tax work will be reconfigured Routinised Decomposed Disintermediated Resource models will change Far-shoring? Online collaboration Crowd New types of people will be needed Para-professionals Process engineers Systems designers Data scientists Focus of the tax function will be redirected Business partner Proactive not reactive Effective and efficient 24
The journey 25
Where should you start? Create a tax technology vision Have a tax technology plan Reassess the tax operating model Map the current state Consider what is possible Develop a desired architecture Layout a roadmap Allocate responsibility for delivery Agree to it and secure budget Review the process design Reconsider the resourcing model Refine the governance framework 26
Q&A 27
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