Financial compliance requirements have evolved over the years, and are currently highly complex and continuously changing. Digital technology and globalization are driving the demand for enterprises to modernize their tax departments and implement processes to meet compliance requirements. Automation and supporting technology have been introduced to help businesses succeed in today’s regulatory environment.
The increased use of automated electronic systems by tax authorities and enterprises has made it easier to collect, transfer, store and analyze large amounts of data without significantly increasing the time spent by companies on compliance.
Some ways automation drives compliance:
AI Insights Helping Make Audits Easier
Artificial intelligence has made a significant impact on many industries, and is poised to revolutionize the tax function. In fact, according to Accenture, the impact of AI technologies is projected to increase labor productivity by up to 40%. For example, AI helps tax authorities see data all the way down to the transaction level, enabling their systems to quickly match both ends of a transaction. This transparency makes tax authorities’ ability to audit even easier, which in turn necessitates enterprises maintaining fully compliant data that is clean and accurate.
Teach the machine – Robots, to the rescue?
Robotic Process Automation (RPA) refers to the use of software robots to automate processes. These robots can perform activities such as transferring data between applications, reconciling and cross-referencing data between different systems and facilitating audits. Robotic audit assessment systems can be trained using massive multi-company data sets in order to deliver actionable results. For example, finance can train the system to spot double entries or to predict transactions most likely to be fraudulent. The usage of these automated audit assessment systems can help enterprises bring their operations into compliance before the auditors come knocking.
VAT automation for tighter governance and tax compliance
Digitalization of the finance function has proven profitable for many enterprises, especially in the realm of VAT. Automating VAT collection and recovery via implementation of a digital program ensures efficient VAT compliance, while delivering significant process improvements that strengthen indirect tax governance. Automating the VAT recovery process enables the highest level of data security and compliance with all international rules and regulations of the various jurisdictions. These sophisticated platforms greatly enhance the transparency of a company’s tax policies, leading to stricter internal and external compliance, and reduced exposure and risk.
Curb VAT fraud and maximize revenue collection
Every year, companies file incorrect VAT claims, reporting T&E data that is inaccurate or not properly backed by evidence. This puts them at serious risk for audits and non-compliance with domestic and international regulations. Valid claims may also be rejected due to incorrect filing, leaving significant sums of VAT unrecovered. Tax authorities are increasingly implementing electronic reporting systems, including real-time transaction reporting systems, in the hope that increased collection and evaluation of data on a real time basis will help to reduce the levels of VAT fraud while increasing the efficiency of VAT compliance and the reclaim processes.
Future of the tax technology ecosystem
Machine learning is used for sorting data, finding matches, spotting anomalies, monitoring, and making predictions and recommendations; basically, it is most useful for uncovering patterns that humans cannot. The Organisation for Economic Co-operation and Development (OECD), a body that supports governments through policy analysis, dialogue and identification of best practices, has recognized the importance of machine learning to the future of the tax technology ecosystem, especially in its ability to maintain regulatory compliance. The organization is putting significant efforts into mapping the economic and social impacts of AI technologies and applications, and their policy implications. This includes a planned launch of a policy observatory in 2019 to ensure the beneficial use of AI.
Steps to Compliance
Financial services organizations must be proactive in establishing a compliance culture, ensuring full transparency in their financial transactions, avoiding any risks of non-compliance, and building trust amongst their customers and stakeholders.
If you’d like to learn more about how your company can achieve total compliance in VAT related transactions, VATBox can help. VATBox is an automated, enterprise-wide, cloud-based VAT recovery solution that has successfully streamlined the global VAT recovery process, providing businesses with unrivaled visibility, compliance, and data integrity, and ultimately boosting its bottom line. Let us show you how your company can thrive in today’s complex financial times.