19November 2021By Soorashree Sadekar, Associate Director, Transfer Pricing Americas, AIGWith a constantly changing tax landscape, increased pressure of resources, and the COVID-19 pandemic, companies are focused on finding ways to do more with less. Technology becomes a natural solution when trying to drive efficiencies. However, with so many technology alternatives available, the choice becomes increasingly complex.How do you choose the right technology? Let's start with an example. Entities in the UK are subject to both Diverted Profits Tax (DPT) and the Mandatory Disclosure Regime (MDR). Simplistically speaking, the MDR requires corporates to identify and disclose "reportable transactions" within 30 days of when they are made available. The DPT requires UK corporations to identify and pay additional tax on transactions that are considered to divert profits outside the UK. In both cases, corporates have to analyze transactional data to verify whether transactions would be reportable under MDR or would be subject to DPT. Start with identifying the problem(s) that you are trying to solve. A clearly defined problem will assist you in refining the ask. Analyze existing people, processes, and tools to document current processes and bottlenecks. Track and evaluate changes in tax requirements to identify overlapping requirements or compliances that might use the same data. Consider whether an improvement in processes or skill sets within the team would support using existing technologies in the organization to meet increasing tax requirements as that would be the most cost-effective solution and get quick wins. These considerations will help identify the drivers for the organization in adopting new technologies. Let's define the "problem" with MDR and DPT compliance ­ For large corporates that initiate millions of transactions daily, all over the organization, collecting and analyzing data, and meeting the compliance requirements promptly can be a problem, especially within 30 days of the transaction being "made available" in the case of MDR. Here it would be helpful to review historical transactional data to identify different types of transactions, identify transactions that may trigger either MDR or DPT requirements, determine the stakeholders for different transaction types, and establish strong processes and controls to ensure that transactions are identified for review as they are initiated/conceptualized. Technology can support pulling transactional data, consolidating it, and analyzing it effectively, however, it can only help where the rules are standardized and predefined, and processes are consistent and well-followed.INSIGHTSCXOINTRODUCING TECHNOLOGY TO MANAGE INCREASING TAX COMPLIANCE
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