What continuous compliance means – and why it’s crucial

Of all the indirect tax compliance challenges global tax groups confront, one stands apart from the rest: change. Sure, most tax laws and rules are complex. And, yes, many tax determinations require multiple clarifications. But change makes all other tax compliance risks more difficult to mitigate.  

The dynamic nature of global tax administrations is a prime driver of compliance changes, as my colleague, Vertex Senior VAT Director Peter Boerhof, notes that “global tax authorities are experimenting with emerging technologies to gain real-time visibility into taxable transactions, which requires businesses to perform tax compliance with unprecedented speed and accuracy.” Not to be outdone, departments of revenue in the U.S. are implementing new systems and technology tools to streamline tax collection, combat fraud and develop new data analytics designed to flag potential instances of non-compliance. 

In response, tax groups need to keep pace with these changes, which brings me to continuous compliance. At Vertex, we use this term a lot – for good reason. Continuous compliance describes an organisation’s ability to stay ahead of evolving tax regulations and rapidly changing tax rates wherever they operate. Doing so requires actions that fall into two categories:  

1. Fulfilling fundamental tax compliance requirements: This encompasses precise invoicing, tax determinations and calculations, mandated reporting, reconciliations, and reviews. 
2. Adapting to changes: This includes responding to new laws and mandates, new internal processes, business growth and expansion, changing supply chain (and related tax complexities) and external oversight. 

Two key aspects of continuous compliance—seamless integration between tax automation solutions and transactional systems, and adherence to evolving compliance best practices—are interconnected. These elements not only facilitate global tax compliance but also require ongoing updates to stay effective. 

Most tax technologists are well-aware of those compliance related changes and needs. They also know that the pace of change is accelerating, placing greater pressure on tax transformation endeavors. Tax automation solutions must satisfy increasing expectations for speed and efficiency expectations related to tax processing and audits. 

As tax technologists, tax leaders and IT leaders collaborate to ensure that tax technology functions smoothly, effectively and “connectedly,” they can ask these questions about their existing solution: 

• Does it proactively identify potential areas of non-compliance risk across global operations before they escalate into costly audits? 
• Does the solution enable the tax group to model the tax impact of business decisions such as expansions, acquisitions or changes in supply chains? 
• Can we benchmark tax performance across different regions or business units to drive compliance best practices? 
• Are we generating accurate, real-time forecasts of tax liabilities to improve budgeting and cash flow management? 

If the answer is “no” to any of those questions, it’s time for a change.