Tax Digitisation: business impacts now and in the future

How does the Vertex solution impact and improve your compliance process – digital versus manual?

Looking again at the shared service centre (SSC) environment, where we prepare most of the returns, the biggest benefit is having a tool to use structurally, and to prepare VAT returns. It's a gradual process but at the end of the day the ideal state would be to step away from Excel entirely – that's basically what we're trying to achieve. You have the raw data files; you enhance them, then you upload them in a tool and do all the preparation in that file. 

Take tax return preparation worksheets in Excel. When they come into the SSC from the local departments, the SSC is confronted with a multitude of custom-made ad-hoc sheets with no consistency, and they have to work with that – it’s simply not sustainable. With Vertex Indirect Tax Returns, we can upload the raw data files and do the entire VAT return preparation in Vertex. We’ve really seen the benefits during the transition to our SSC. 

Digitising the compliance process also forces you to start working with workflows. When you are an environment where you have to complete a lot of returns on a monthly basis it’s important to keep track of all deadlines. The Vertex compliance solution has workflow built into it. In August, Vertex Cloud VAT Compliance will give us an even more comprehensive option which will replace the need for Excel or other additional software. 

I think if I had one thing on my wish list for process improvement it would be that more countries are quickly added to the e-filing functionality through the Vertex API, like the UK and Germany. As soon as you have that, you reach the next level for even more structural VAT return preparation through Vertex. Once the comprehensive VAT compliance solution is released, Vertex will be the gold standard for every VAT return being prepared. 

Did you save on advisory or compliance fees from external providers? 

Of course, having an in-house tool sets the expectation that you start doing returns yourself, so this enables VAT return preparation savings. Again, looking at Making Tax Digital (MTD), without the technology and the SSC we would have to go outside for services and support – so cost savings are definitely there. I think the challenge remaining may be countries where you need to build language skills and need access to niche technical expertise. 

What do you see as the relevant trends and what’s the plan for Thermo Fisher’s transformation journey ahead? 

Well, the continual checking of the legislation surrounding digital reporting is always priority number one! We shouldn't forget that many of these digital reporting requirements have been around for quite some time. After the financial crisis, some governments really started to digitise relatively quickly, and they have learned from that experience. If you look at Poland, for example, we have witnessed the end of the VAT return and in Spain the government has had real-time reporting in place now for a while and is experimenting with pre-populated VAT returns. So, it's likely that countries will enter a new phase of compliance where it's really going to be about explaining changes to the business and maintaining your master data quality. As a corporate function you need to clearly communicate and raise awareness for these requirements and trends. 

Nobody can predict the future, but I think it is likely that at some point governments will also start to look for additional tax revenue in the post-pandemic era. Who knows, but as a result the number of audits may well go up, and we need to be ready for that. Very likely these will be e-audits where at the beginning you'll be speaking to an EDP auditor who might ask more questions about your technical landscape and functional specs. You need to have documentation ready at hand and speak to the auditors in a more technical way than you did previously. 

Another trend that I think is becoming more common, is the further integration between SAF-T reporting and VAT reporting. SAF-T is typically more granular periodic reporting, but it can tie very nicely with the VAT reporting – as seen in Poland already. In my experience with SAF-T you need IT involved in the process. So, it's important that you get the project on the roadmap, especially in bigger companies where it can take a while before a project lands. You need to manage these projects very well because they ask for different skills – more project management skills are needed in your tax function to deploy these projects.

Finally, I think you simply have to be open to technology as the enabler of flexibility and scalability.  It’s key that you understand trends and experiment with technologies. For example, there’s a case for robotic process automation (RPA), so it’s key that you really start working with these tools and build practical experience. Only then you can see the full potential of the tools. A presentation will simply not cut it – you really have to work with the software to see what is possible – who knows, in-house tax departments could become even less dependent on the IT function in the very near future.  

Blog Author

Daniel Jansen, Senior Manager Indirect Tax | Thermo Fisher Scientific