Vertex: Tax Data Management Experts

Unique in the tax technology industry, Vertex’s Chief Tax Office (CTO) provides insight regarding the impact of tax regulations, policy, enforcement and emerging technology trends on global tax department operations. The Vertex CTO group consists of former tax executives from various Fortune 500 multinationals, who bring their in-house tax and industry expertise to Vertex’s solution development, services and client interactions.

Invest 2018: With the tax landscape marked by ever-changing and ever-more exacting regulatory demands, why do businesses need tax data management solutions that are not only fit for purpose now, but sufficiently flexible and adaptable to have application down the road too?

Vertex: The OECD and many government tax authorities are calling for new processes, enhanced compliance and levels of transparency and information reporting. However, most corporations and governments are not quite ready to respond to the overwhelming volume of ever-changing and increasingly complex rules, regulations and reporting obligations. In fact, based on existing data and new data transformation, requirements and solutions, corporations and governments alike are currently struggling with these demands and will continue to do so. This state of affairs is compounded by the fact that tax data management and technology is lacking on both sides to cope with the explosion of digital transactions marking the global business landscape. It all amounts to a challenging environment, yet one destined to shape new compliance demands today and in the future, thereby creating the need for advanced tax data management applications.


“Corporations will assess scaleable technology to be the right way forward.”


Corporations will assess scaleable technology to be the right way forward for a growing business. This is because technology that can easily and efficiently adapt to operational changes in business structure, developing tax rules and various compliance needs across different jurisdictions in which they operate, has the potential to transform a business.

This era of systemic hyper-regulation demands new technology and procedural changes to achieve economic and technical efficiency across the entire life-cycle of tax planning, provision, compliance and audit management. Beyond the early adopters, have you found this truth is being accepted and acted upon?

The tax function has traditionally been slow and at times even resistant, to embrace new processes and technological advances. This lag is, in part, due to tax professionals and departments having a difficult time justifying technology and resources to achieve ROI. Part of the ROI justification challenge for tax departments is that it is difficult for tax professionals to ‘guarantee’ specific rate reductions or cash tax savings – that is, until the precise planning they want to execute with new technology or freed up resources, can be acted upon. Although there is always a list of planning opportunities to look at, the ‘devil is often in the detail’. Until the numbers are calculated and the ‘what-if’ scenarios evaluated, the ROI case remains general.


“The C-suite is demanding that tax must be a strategic business partner.”


For instance, in terms of improved risk management, governance and control over the tax processes, the attitude has always been, “if it isn’t broke, don’t fix it,” so that it is difficult to make a case for upgraded technology and resources. Consequently, it is hard to ensure that tax has the transparency into the big picture.

It takes time to recognize the benefits that the change to any technology can eventually bring to a company, with some tax departments not realizing the full potential, so that they struggle to explain it to IT and finance. Moreover, with silo mentalities sometimes prevailing across the respective finance, tax and IT functions, the holistic understanding required to make a broader business case for the technology is often not there. Indeed, with stakeholders erring on the side of caution in respect of risk, if they believe it to be currently managed, they are reluctant to do anything that could potentially increase it.

What would you describe as the provenance of and motivation behind Vertex’s visionary tax data management approach?

The financial systems of companies have been traditionally disconnected from the needs of the tax department for reporting and compliance. This statement was further corroborated by a recent BNA survey of large global MNCs, which indicated their number one internal challenge to be how disparate the financial accounting systems are from the needs of tax.


“The cost of data storage is becoming less expensive.”


The fact is that financial systems are set up to operationally run the business and this will not change. The good news, however, is that adopting tax data management technology can help to mine, organize, segregate, and apply the relevant data from many systems to allow for a more unified and integrated enterprise tax reporting and compliance function.

While the financial accounting systems of a company contain its books and records, this raw financial data is not in a clear applicable format that can be used by tax, rather being generally organized by business unit for operations. Thus, some of the transformation that tax teams need to undertake to be able to effectively use and apply the specific data, includes joining it to a common chart of accounts, accounting standard, and currency- translation standard on a legal entity level, as opposed to operating on a business unit basis.

One objective is to align finance and tax through a uniformed tax data management platform that can bridge the data between the two functions, in order to provide a more efficient financial reporting and close process. In addition, increased governance and control over the close process ensures financial and tax controls (SOX controls) are being met and are not at risk.

How does tax data management technology allow for more sophisticated tax planning strategies, as well as enabling tax to be a strategic business partner?

Technology can provide the data that tax needs to manage risk, plan and properly calculate tax to benefit the business, instead of being seen as a back-office compliance function. The C-suite is demanding that tax must be a strategic business partner more so today than ever before. With limited resources, this generally means that tax must look to leverage data management solutions to help them more efficiently collect and transform the data they need to meet all regulatory compliance filings. If this is more efficient, resources can then focus on more value-added projects to increase the brand and reputation of the tax team as a strategic business partner.

What would you describe as the best features and benefits of data management solutions and to what extent has tax technology become more affordable and reliable?

Advanced tax technology should feature open architecture and a flexible user interface, supporting currencies and accounting standards for all tax jurisdictions in which a corporation operates. It should be able to unify all tax data into a single platform that can be integrated into a businesses’ existing environment for it to manage all tax activities, including planning and strategic planning globally.


“Technology automation creates new processes for finance, tax and IT.”


Advanced technology should enable sophisticated reporting and modelling through custom reporting, query, and analytics capabilities. Tax can then more proactively evaluate the ETR impact of various tax planning strategies and ensure that business decisions are evaluated on an after-tax basis. If data is accessible for compliance and provision scenarios, that data can be leveraged to assist in ‘what-if’ scenarios and tweaked to better plan for the future.

One key development is that cloud and open API systems and the cost of data storage is becoming less expensive, which spells good news for tax. The point here is that not everything has to be changed at once, with current systems still usable through the integration of pieces of new technology.

Do you see any risks associated with introducing greater automation to the tax data management lifecycle?

Technology automation creates new processes for finance, tax and IT. As with any change, new processes can create risk, necessitating new or updated key controls, as well as testing of these controls. The results need to be tested and validated, so that key stakeholders are confident the technology has been implemented correctly. This takes time and may mean repetitive testing month to month or quarter to quarter, until all stakeholders have signed off. One recommendation would be to have a tax technologist on the team lead this tax data management transformation.

As government tax administrations familiarize themselves with tax data management technology, they may begin to develop more targeted audit information requests, as well as enhanced expectations as more businesses adopt this technology. Tax departments ideally want to stay one step ahead of these increased demands.

Nancy Manzano, CPA, MS Tax, Director in the Chief Tax Office at Vertex Inc.

Bernadette Pinamont, CPA, JD, Chief Tax Officer – Income Tax at Vertex Inc.

George L. Salis, Principal Senior – Tax Compliance at Vertex Inc. He is also a Certified Business Economist (CBE) and tax lawyer specialising in International and European Taxation, Transfer Pricing, and Economic Law.

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