tax-technology-outlook- 2016-fei2015

©Grufnar/istock/Thinkstock
Tax
Tech
nol
ogy
Outlook20 16
By
Brad Brown
and
Scott Weisbecker
©2015FinancialExecutivesInternational|financialexecutives.org

Financial Executive • ANNUAL 2015 61
taxtechnology
©Grufnar/istock/thinkstock
or many forward-thinking companies, 2015 was the year they began to
recognize the value that mining data and insight from their tax func-
tions can provide beyond a traditional focus on compliance activities.
Looking ahead, we see many opportunities for tax departments to
add even more value across the entire enterprise. In fact, 2016 may be
the year more companies begin breaking down corporate silos and un-
locking the full power of their tax operations — in part by investing
strategically in technology solutions that help put their tax depart-
ments on par with their finance operations, and by integrating tax into
their enterprise information management systems.
Adopting an enterprise-wide mindset toward tax technology is be-
coming increasingly important in a constantly shifting regulatory land-
scape, and as the amount of data that needs to be analyzed grows year
after year. In response, finance executives and tax directors are looking
to their tax software and enterprise technology vendors for help, and
the vendors are responding.
In this evolving environment, how can you help assure that you are
enhancing value for your organization? We suggest the following reso-
lutions for 2016:
Resolution #1: Demand greater integration of data systems and
applications to promote efficiency and capitalize on the information
locked in big data.
Many tax departments still grapple with spreadsheets, paper state-
ments and other unstructured data as they go through the compliance
process. But regulatory demands and executives’ hunger for informa-
tion that can help them run their businesses more effectively are driv-
ing the adoption of technology solutions to automate the data collec-
tion and review process.
As tax jurisdictions require enhanced transparency and look for in-
creased tax revenue, compliance with domestic and global regulations
involves processing large amounts of data that may be stretching the
limits of traditional spreadsheet-based systems. The upcoming country-
by-country reporting requirements under the Organization for Economic
co-operation and development (OEcd)’s Base Erosion and Profit Shifting
(BEPS) Action Item 13 guidelines is just one example of the type of en-
hanced reporting that could become the norm over the next few years.
But we believe that the even more exciting prospect for tax depart-
ments — the key to unlocking real value — lies in tackling the automa-
tion challenge, because it opens up the opportunity for financial execu-
tives to proactively use the information within tax compliance filings
and reporting requirements to help improve operations across the en-
tire enterprise. For example, an automated system can tap into tax-re-
turn data to identify not only tax audit risks, but also opportunities to
enhance tax planning.
To do this, data input needs to be automated and pulled from dispa-
FFor many forward-thinking companies, 2015 was the year they began to
For many forward-thinking companies, 2015 was the year they began to
recognize the value that mining data and insight from their tax func-
Frecognize the value that mining data and insight from their tax func-
tions can provide beyond a traditional focus on compliance activities.
Ftions can provide beyond a traditional focus on compliance activities.
add even more value across the entire enterprise. In fact, 2016 may beFadd even more value across the entire enterprise. In fact, 2016 may be
Developing an
“enterprise State of Mind”
can Be critical for Success

rate systems throughout the company. The transition to in-
creased automation will move away from standalone solutions
and require close attention to data governance to help ensure
the integrity of the information that populates systems.
Integrating your tax department information into your com-
pany’s existing business intelligence (BI) solution can be a major
step forward in this area. BI tools can provide the needed func-
tionality to manage and report on all the tax function’s opera-
tions, ranging from transfer pricing to automating provision/
compliance calculations. Here are just two examples:
• Operationalizing transfer pricing policies can bring significant
value to your company in terms of compliance reporting and
enhanced value. But accomplishing this goal requires gathering
data from multiple sources, which is often calculated at the
transactional level. An automated system can help assure more
accurate reporting and better management. Tangible and intan-
gible transfer pricing scenarios that can be addressed with a BI
solution include cost-plus, re-sale minus, operating margin, and
service costs. An effective solution enables the separate legal
entity financials to be extended for calculation analysis moni-
toring and reporting, which benefits your supply chain manage-
ment operations as well as the tax department.
• In the same way, tax compliance and reporting rely on infor-
mation from multiple systems that may not be able to generate
data that is “tax sensitized” for the tax department, thus requir-
ing manual reconciliations and manipulations. Governance
frameworks that include roles and responsibilities, controls, ac-
countability and validation are needed to foster accuracy and
timeliness. Automated input can significantly reduce, if not
eliminate entirely, manual processes. The result will be im-
proved reporting for your tax department and your overall fi-
nancial operations. BI tools can significantly reduce the time
spent calculating provision results by automating book-to-tax
basis differences. It can create a clear audit trail and variance
reports that can enhance efficient review between compliance
and provision. Your provision/compliance teams could then
spend more time analyzing variances from period-to-period and
less time running and populating reports.
As these and other examples illustrate, the use of BI tools can
strengthen controls, help mitigate risk, reduce time spent on
reconciliations, and potentially eliminate the need for collecting
information manually — enabling tax departments to focus on
analysis and effective tax management.
Most important, BI tools offer automation functions that en-
able businesses to extract, transform, and read and write data
back to a central database. As a result, companies can reduce
compliance costs, facilitate transparency, improve financial re-
porting accuracy and timeliness, and mitigate risks.
If you can see the benefits of this type of integrated reporting
system for your organization, resolve to explore how your orga-
nization can automate tax processes. Moreover, give thought to
which tax processes could most benefit from such an approach
and partner with your information technology function to de-
velop a solution that will meet your needs.
RESOLUTION #2: Spend time exploring how analytics/
visualization can support your teams and how it can be
integrated into your tax department.
As you likely know from enterprise solutions you already have
in place, much of the time spent in data analysis goes into pre-
paring the data from different sources before it can be analyzed.
Traditional tax solutions alone typically can’t manage and pro-
cess the data to provide meaningful analysis, no matter the size
of the company.
During 2016, take a look at your current data architecture and
analysis models and make sure tax data is included. If it isn’t
currently part of your models, learn how you can add it. This
area is evolving quickly, and many companies and service pro-
viders are developing various approaches to capture the poten-
tial value of enhanced data and analytics.
Begin the dialogue with your peers and advisors. That step
can likely help your entire organization operate more effectively
and efficiently.
The benefits of improved efficiency within your tax operations
can be significant. Models using advanced algorithms and ma-
chine-learning techniques are not only able to help detect
anomalies, but can also predict where they may arise in the fu-
ture. For instance, this type of enhanced, automated modeling
can help segment and drill-down on profit and loss on opera-
tional transfer pricing transactions based on product, service
and function. The results can then be used for month-to-month
and historic benchmarking.
With access to the right data, the tax department can help
identify tax-savings opportunities more easily and, even more
importantly, identify and mitigate risks more quickly. For ex-
ample, an analytics and visualization model could quickly ana-
lyze research & development expenses to determine if the ap-
propriate credit is being used. On the flip side, the data can also
help identify whether the amount being claimed is inconsistent
with previous amounts.
Remember that a picture is worth a thousand words. Data vi-
sualization tools such as heat maps, 3-D bubble plots and cluster
charts can capture information more easily and help you find
outliers more quickly. These tools can give financial executives
the ability to slice and dice large amounts of data and ultimate-
ly isolate relevant subsets to drive business decision-making.
Let’s consider a real-world example. Undertaking a manual re-
view of your company’s accounting methods and credits proj-
ects to determine whether expenditures are currently deduct-
ible or capitalized can require plowing through high volumes of
transactional data — and the time and resources allocated may
not generate any actionable information. Using automated data
mining instead can quickly yield the information your teams
need to help maximize the value to your organization.
“Dashboards” have become a must-have for almost every busi-
ness professional today for a quick, yet thorough view on overall
TAXTECHNOLOGY
S!

Financial Executive • ANNUAL 201564
operational management. Explore
how your providers can help link
your tax department into dash-
boards as well. Tools exist that can
give users the power to create dash-
boards of tax return deadlines, list
levels of review and determine
where in the review process the re-
turn resides.
If your company, like most organizations today, is focused on
taking a risk-based approach to your overall financial manage-
ment, utilizing data visualizations can help reveal where tax
work is in the lifecycle process or manage the work pipeline. Its
impact on planning can also be significant. With a few clicks of
a mouse, it is possible to segment the data by geographic loca-
tion to “vary” apportionment percentages and or tax rate to see
the overall impact on the company’s effective tax rate.
Resolution #3: Consider using the cloud for tax data and
management
We’ve seen that companies of all sizes are becoming increas-
ingly comfortable with the ability of cloud-based solutions to
safeguard an enterprise’s financial information. Furthermore,
the cloud is making storage and computing power easier to ac-
cess and more cost-effective for handling large amounts of data
and running complex models than expensive, on-premise alter-
natives. All this speaks to putting an exploration of the cloud’s
role in your tax department on your 2016 to-do list.
This is especially true given many companies’ focus on reduc-
ing IT infrastructure cost of ownership, including development,
deployment and maintenance. IT departments may be stretched
and lack capacity to support and maintain tax applications that
require regular updates to comply with global regulations. With
cloud-based services from third-party tax providers, companies
with limited IT capacity can obtain IT products and services in
the tax department without the need to be responsible for up-
dating software/support. Most of these service offerings are au-
tomatically updated by vendors, provide data storage in a safe
and secure environment, and can be accessed at any location
around the globe.
As companies continue to drive a greater focus on cybersecu-
rity and cost-effectiveness, we expect vendors will develop pro-
grams and solutions that meet these needs, and that we will
start to see a rise in versatility.
Resolution #4: Embrace a mobile strategy for tax that
incorporates stringent security
Mobile technologies have reshaped our expectations for speed,
use and content-driven interfaces both outside and inside busi-
ness. We encourage you to embrace the adoption of mobile ap-
plications to increase employee engagement and satisfaction --
while remembering to maintain a multi-channel approach to
desktops for more traditional tax professionals. The time has
passed to view mobile as a competitive edge; now the conversa-
tion needs to center around what
needs to be done to keep up.
The quick response time from
mobile apps is embraced by millen-
nials, who often may trust mobile
more than desktop experiences.
This “need for speed” is driving
higher expectations from senior ex-
ecutives to quickly retrieve business
insights with anywhere/anytime access to tax data. For example,
it’s never too early to start thinking about how to give your tax
professionals the ability to access workflow approvals or dead-
line notifications from their personal and professional mobile
devices, be they tablets, phones, or even wearables.
As your company continues to incorporate mobile across your
operations, work with your providers of tax and enterprise solu-
tions to consider what needs to be done to safeguard and protect
data. Security can be an issue for all companies, but more so for
those without a robust mobile strategy. As more data is accessed
through mobile devices, new vectors for data breaches and hack-
ers open up. Your tax and finance departments need to have a
strategy to protect the data their professionals work with each
day. Keeping mobile and mobile security top of mind when you
discuss new software solutions is critical.
Resolution #5: Be prepared for the continued evolution of the
tax application market
Enterprise technology vendors are beginning to venture into
the tax software market. While some of the hottest trends
could be seen as tax professionals leveraging new enterprise
technology capability, don’t dismiss the value of software pri-
marily aimed at the tax function that can be integrated into the
larger organization.
Tax application vendors aren’t standing still. They are finding
ways to be more enterprise focused. It is likely these vendors
will continue to go further “upstream” and provide an increased
focus on data gathering and management. One possibility is an
enterprise data warehouse approach to data management that
could then be integrated into the enterprise’s larger data efforts.
In addition, they may go “downstream” and move toward an
open architecture to facilitate enhanced reporting and data and
analytics enterprise-wide.
Ultimately, finance and tax department executives will be
able to consider each vendor’s architectural approach to the un-
derlying technology and how well solutions integrate enter-
prise-wide.
Tax Technology as Part of the Enterprise-Wide Mindset
We think there’s a key to succeeding with your tax technology
resolutions: communication. As a financial leader in your com-
pany, you’re in a unique position to foster conversations across
your organization between your tax and IT departments, be-
tween your tax and finance departments, and with your tax
software vendors.
taxtechnology
With access to the right data,
the tax department can help
identify tax-savings
opportunities more easily
and, even more importantly,
identify and mitigate
risks more quickly.

Ensure that these key company stakeholders are familiar with
your tax function and how it operates. Review what data is being
collected and what other streams of financial information might
be worth tapping into to benefit the entire organization.
Once your tax department is armed with analytics and visu-
alization tools, raise the bar and challenge it when it comes to
monthly or quarterly reporting. You’ll help engage your teams
and improve your oversight at the same time.
Think about how far cloud and mobile applications have come
and what they can do for your organization in terms of collabo-
ration and employee engagement. Ensuring a stringent security
framework is incorporated into your overall strategy is key to
safeguarding financial and other confidential information, and
to keeping operations as seamless as possible.
Evaluate current tax and enterprise technology vendors and
don’t be afraid to ask how their tools can be integrated into the
larger organization. To help get the most from your investment,
ensure the tax technology tools being used are scalable and eval-
uate how they integrate into the enterprises’ larger data strategy.
Resolutions aren’t meant to be achieved overnight. But we be-
lieve that these five areas are worthy of your time and attention
throughout 2016 because they are where you’ll likely see the
most activity and where your organization may gain the most
benefit and value.
Brad Brown (bradbrown@kpmg.com) is the chief information
officer for the Tax practice of KPMG LLP; he is based in Los An-
geles. Scott Weisbecker (sfweisbecker@kpmg.com) is a part-
ner and the national service line leader for the Tax Transforma-
tion and Technology practice of KPMG LLP; he is based in New
York City.
This article represents the views of the authors only, and does not necessarily
represent the views or professional advice of KPMG LLP.
The information contained herein is of a general nature and based on au-
thorities that are subject to change. Applicability of the information to specific
situations should be determined through consultation with your tax advisor.
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S.
member firm of KPMG International Cooperative (“KPMG International”). KPMG
International’s member firms have 162,000 professionals, including more than
9,000 partners, in 155 countries.
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