Interviews

How Technology Revolutionizes Tax Processes: Improving Accuracy and Compliance for Businesses

CXOToday has engaged in an exclusive interview with Pritin Kumar, Partner, Deloitte India.

  1. How has the integration of technology into tax processes improved accuracy and compliance for businesses, and what are the key technology-driven initiatives that have contributed to this transformation?

    Typically, for medium to large organisations, the volume of transactions is significantly high. In the absence of use of technology or automation, the tax compliances are handled manually handled, i.e., extracted from ERP / source systems and then processed / reconciled looking at multiple Excel files – this involves significant time and effort and is prone to human errors. With the help of technology, data can be seamlessly extracted from ERP / source systems and then processed with preset rules and validation – this saves significant time and results into improved accuracy  and timely compliance with enough time for review by tax professionals. The use of technology encompasses writing extraction code, data wrangling and reconciliation, use of technology solutions

  2. In what ways can advanced data analytics and artificial intelligence be utilized to enhance tax planning and optimization strategies for organizations?

Advanced data analytics can help organisations harness data and analyse it in a meaningful way for critical decision-making relating to tax. From data visualisation tools that enable organisations to make decisions around tax, predictive and prescriptive analytics is useful for managing tax payments effectively resulting in effective cash flow, fast-tracking of litigation by identifying and removing bottlenecks, better control over refunds, effective tax-aligned supply chain, etc. The use of artificial intelligence and machine learning is being looked at to automate processes like TDS, classification of assets, etc. as well solve complex tax challenges like positions on outstanding tax litigation.

 

  1. With the growing prevalence of cloud computing and data storage, what are the benefits and challenges of utilizing cloud-based tax solutions, and what considerations should businesses keep in mind when adopting such technologies?

Tax solutions today are moving from on-premise deployments to SaaS offerings on Cloud – this leads to a significant reduction in infrastructure cost, as well as ease of onboarding / deployment and maintenance of the solution. Such tax solutions are easily accessible from anywhere. The potential challenges for organisations voiced are primarily around data security and confidentiality, which are being addressed – more and more organisations are now open to Could-based tax solutions. The Cloud-native features make development quicker and provide significant ‘shared’ computing power for quick processing to users. Overall, tax solutions are clearly headed towards SaaS offerings on Cloud.

 

  1. How can technology facilitate seamless cross-border tax management, particularly in the context of transfer pricing?

In case of multinational enterprises, different types of tax  data is collated from jurisdictions around the world for the purpose of transfer pricing compliance, tax provisioning, statutory compliances, etc. In the absence of use of technology, data would be received from jurisdictions on email and then consolidated centrally – this involves time and efforts and multiple reviews to ensure that correct data is reported. With the help of technology solutions, the data collation process in organisations can be automated to a significant extent. The newest global tax compliance is around Pillar 2 / GloBE Rules, where use of technology will be imperative, as it involved hundreds of data points for each legal entity.

 

  1. What innovative technologies, such as blockchain or smart contracts, have the potential to revolutionize tax administration, enforcement, and transparency, and what are the key challenges in their adoption?

Emerging technologies such as blockchain and artificial intelligence / machine learning have significant potential to transform the processes of tax administration. With advanced tax analytics and artificial intelligence, tax administration can check tax evasion to a significant extent. Blockchain can ensure that data is not tampered and ensures credibility of data. Under the Government’s Project Insight, an integrated data warehousing and business intelligence platform is being rolled out in a phased manner. Things are clearly moving in the right  direction – the potential roadblocks could be the time taken for acceptance by tax administration and taxpayers, having necessary infrastructure and significant investments for implementation.

 

  1. How can organizations leverage data analytics and visualization tools to gain valuable insights from their tax data and make informed strategic decisions?

Please see the response to question #2.

 

  1. With the rise of e-commerce and digital transactions, how can tax authorities effectively leverage technology to monitor and ensure proper taxation of online transactions?

With the emergence of digital business models, there is a significant rise of digital transactions. From the perspective of the tax administration, the good part is that all such transactions leave a digital trail, which makes monitoring tax compliance easier. Data regarding e-commerce and digital transactions is collected by tax administration and is readily available through reporting in GST returns, TDS returns, etc. For cross-border transactions, there is equalisation levy. It is understood that data is shared between income-tax and GST authorities – the triangulation of, say, GST and TDS data, would further sharpen this process.

 

  1. What security measures should be implemented to safeguard sensitive taxpayer information in the era of digital tax systems and increased data sharing between tax authorities and businesses?

It is critical that the portals / systems in which data is stored and processed should be well-protected from a security and confidentiality perspective. Some considerations for this could be around the solution architecture, network architecture, cloud security components, encryption of data (especially for personal, sensitive data), access control, password policy, malware protection, vulnerability management agent, endpoint protection, anti-virus protection, etc. Taxpayers have the right to ensure that their personal and confidential data is protected.

 

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