Continuous compliance catches on

Tax transformation is challenging, but treating compliance as a static process can expose businesses to unnecessary risks and costly complications. Adopting a continuous compliance mindset enables tax, finance and IT teams to address these risks effectively while taking advantage of innovative technologies. A global tax platform ensures ongoing compliance and control in a dynamic landscape, providing additional automated reporting, increased accuracy in data, and more transparency at every stage of the indirect tax workflow. Centralizing tax data also enhances visibility, unlocks performance insights, mitigates risks, and refines tax strategies.

Other business functions, industries and disciplines have undergone similar transformations. Inside companies, personnel, purchasing, risk and data processing departments have evolved into human resources (HR), procurement, enterprise risk management (ERM) and information technology (IT) groups. Industries like banking (financial services), farming (industrial agriculture) and video rentals (streaming) have also changed to reflect the dramatic ways in which new thinking and technological innovations transformed their offerings.

New analytics, processes and technologies are also streaming into tax teams. Traditional tax compliance approaches did not give much thought to edge computing, data analytics, e-invoicing, real-time reporting, continuous transaction controls or customer experience management. Traditional tax compliance focuses on little else besides compliance risks. Today, tax teams must continue to alleviate compliance risks while simultaneously responding to ongoing internal changes driven by business transformation, growth initiatives and evolving regulatory requirements. A continuous compliance capability mitigates risks and optimizes tax planning opportunities by considering all three of those areas.

Continuous compliance automates the intersection between commercial complexity and tax compliance with precision and regulatory accuracy – in real-time and on-time, repeatedly, no matter where the organizations does business.  

The new components of compliance 

Just as the tax “function” – the collection of organizational processes and activities that affect compliance –extends beyond just the tax “group” – the people, processes and automation solutions within the direct control of the head of tax – so, too is continuous compliance larger than the mitigation of compliance risks. Continuous compliance addresses business transformation and business growth while identifying how both sets of activities interact with tax compliance. As such, each component is worth a closer look:

Compliance risks

Tax authorities worldwide are rapidly adopting digital transformation. This shift introduces stricter requirements, including: 

• A shift to destination-based tax situs; 
• Intensifying scrutiny of trade facilitators, especially e-commerce platforms;
• The replacement of periodic self-assessments with real-time and near real-time government assessments; 
• The adoption of new e-invoicing and e-reporting requirements; 
• The deployment of analytics and other advanced technologies to bolster tax compliance enforcement;
• And enhancements to cross-border information exchanges and joint audits.

Business growth

Activities such as entering new markets, launching products, or pursuing mergers and acquisitions represent growth initiatives with significant tax compliance implications.

When a company enters a new country, compliance processes and tax technology must scale to satisfy that location’s unique tax compliance requirements. When this flexibility is insufficient, unfavorable outcomes follow – including lost revenue, customer experience problems and profitability declines. A similar dynamic plays out when smaller companies enter new cities, states and regions. As tax leaders monitor the intersection of tax compliance and business growth, they should zero in on:

• Cross-border transactions that require different tax determinations and calculations;
• Supply chain changes, including new suppliers across tax jurisdictions, distribution and sourcing shifts, e-commerce adoption, and changing customer locations;
• Tax liabilities and compliance risks associated with M&A due diligence and post-merger consolidation;
• And other changes in business models and structures that affect tax calculations, tax compliance and related risk mitigation efforts.

Business transformation

Digital transformation impacts tax teams just as much as other areas of a business. 
First, it introduces advanced technologies that make business activities increasingly digital and data-driven, creating significant implications for tax compliance. Tax-relevant data from procurement platforms and e-commerce systems must be seamlessly accessed, integrated, and structured by tax automation solutions to ensure compliance and efficiency.

Second, tax transformation must align with broader transformation efforts, particularly those involving finance. Tax, finance and IT teams must collaborate to maintain accurate tax data and enable seamless integration across tax automation solutions, ERP systems, procurement platforms, e-commerce platforms, and accounting applications. This collaboration is essential for achieving scalability and adaptability, ensuring tax systems can flex and respond to new regulatory demands at a moment’s notice.

Additionally, the adoption of AI within tax processes introduces efficiencies by automating routine tasks, reducing manual effort, and enhancing data accuracy. As leaders advance tax transformation, several considerations must be addressed:

• Limited IT resources for manual tax tasks and building custom tax tools.
• Maintaining rate tables in ERP or point-of-sale systems, which is time-intensive, prone to delays, and costly.
• Legacy systems that require specialized knowledge and impose high maintenance or workaround costs.
• Managing multiple disparate systems, which increases IT workload and maintenance expenses.
• The need for scalable, end-to-end continuous compliance capabilities to adapt to evolving regulations efficiently.

Automation assessment

Continuous compliance enables organizations to stay ahead of evolving tax regulations via tax automation that adapts to changing legislation, rules and rates while providing real-time
visibility of tax data. It also requires a tax automation solution that provides end-to-end support of indirect tax compliance, including registrations & location, product classification, liability & calculation, customer invoicing, returns & reporting and data insights.

When determining whether a tax automation solution delivers continuous compliance, it helps to assess these areas:

• Platform: Does the solution support continuous automation across all aspects of the end-to-end indirect tax workflow, ensuring efficiency, accuracy, and global scalability to support business growth?
• Cloud transformation: Does the solution support tax compliance needs regardless of whether they are managed locally, at the edge or in the cloud?
• Integration: Does the solution seamlessly integrate ERP, procurement, billing and e-commerce systems?
• Proactive risk management: To what extent do the solution’s tax rules and process controls ensure accuracy, efficiency and adaptable compliance via automated calculations?
• Customer experience: To what extent do tax calculations on invoices reduce customer billing disputes and foster trust?
• Tax visibility and tax data analytics: Does the solution provide visibility of all tax data in a centralized system that can be leveraged to produce insights on performance, risks and opportunities for tax strategy optimization?
• Data management: Can the solution pull data from diverse systems into a unified platform, eliminating the need for time-consuming data aggregation?

Continuous compliance transforms tax compliance from a static, reactive process into a dynamic, integrated strategy that aligns with business growth, transformation, and regulatory change. By leveraging centralized data visibility, scalable automation, and advanced analytics, tax teams can streamline compliance, mitigate risks, and unlock opportunities for strategic tax optimization. Tax leaders who embrace this approach are well-positioned to adapt to the evolving global landscape while driving meaningful value for their organizations.