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Tax Automation: How difficult is it for In-house Tax departments to find the right solution?

Andrew Bonhet MD Innovate Tax

At CBO Search, we have seen a steady and strong demand from in-house Tax departments for Tax Technology candidates with a mix of VAT and SAP or Oracle expertise.

Now that In-house Tax departments are developing their own Tax Technology teams, one of the growing trends is for Tax to take control over their own IT set ups.

To discuss Tax Automation and the choice of solutions, CBO Search recently met with Andrew Bonhet, Managing Director at Innovate Tax. Andrew is the founder of Innovate Tax and Chairs the Oracle Tax Management SIG. With 20 years’ implementation experience, he is the go-to Oracle eBTax expert. Internationally recognised as the best in his field, Andrew presents globally on all forms of Indirect Tax and Oracle.

First, what are the common denominators for choosing tax automation software?

Andrew Bonhet (AB) – I think first we need to look at the choice for tax automation and then whether to go for tax automation software. For most, when we talk about tax automation the instant reaction is to think of one of the 3rd party tax vendors and I think your question is a perfect example of this because you said tax automation software and not tax automation. Tax automation is going to be a reasonably big investment in any way you attempt it because there is a huge amount to think of and not just how to determine the correct tax rate. But the primary reason to choose tax automation is to force better controls around compliance.

In our experience, most CFOs don’t really care about indirect tax because it is a pass-through cost and so does not affect them. But the truth is that there is often a huge cost involved in the capturing, processing and filing of indirect tax and not to mention the opportunity cost of recovering your tax correctly. So, the trigger point is that a company has failed a VAT audit and is looking at a large fine. That’s the number 1 reason for choosing tax automation.

Other factors would be having a shared service centre where it is not possible for users to manage the choosing of rates manually or that you have multiple ERP systems and want one common source of truth for tax.

What in your views are the main pitfalls in choosing a solution? How to avoid them?

AB – In short, greed and lack of knowledge. The term “Stick to your knitting” means stick to what you’re familiar with and often, a consultancy will be more involved with one tax engine provider than another and be biased towards the one they know and are more likely to get a better return on. The right solution for you as a customer may not be the right solution to implement from the integration partner! But from the customers point of view, the issue is not knowing what you can do. If you walk into a restaurant where there is no menu – you ask for what you think is available. You need to be shown everything and even more than this, look outside just the common options as there are boutique consultancies that will outperform the big4 on cost and solution provided.

Ideally, get one company to help do the vendor selection and leave it to a separate company to integrate it for you. The choice of the solution should be made first then the choice of the integration partner made second but make sure you have an estimate of the implementation costs as these greatly vary between products. At Innovate Tax, we do work with 3rd party tax engines but our specialty is the in-house Oracle tax engine. This is obviously only going to work if your ERP solution is Oracle but the point is that there may be a solution already available to you as part of your existing ERP license with no extra cost to you.

How a business can know a solution is the right one?

AB – Tax is Tax. Pretty much any tax automation tool, if set up correctly will do what they need but the emphasis should be on making sure the customer knows what they need – that’s why getting expert and ideally independent advice will be key to a successful implementation. Go in blind and you could end up with exactly the same solution as you had before.

Are Tax engines on the decline? The rise of the add-on solutions?

AB – Absolutely not. Oracle may be the only ERP that has a proper inbuilt solution but am sure in the next 5 years we will see other ERP products developing tax automation in house. But with all the changes we are seeing with the SAF-T reports and real time compliance – getting tax automated and correct first time is going to become even more important. Expect to see more adoption than decline, but it may be new players such as ourselves that bring the more innovative solutions than the more established existing providers

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