Unlock the value of big data and data analytics for indirect tax in retail

Big data is essential to the retail industry's strategic toolkit - key for innovation and providing deep insights into customer behaviour. Managing customer data is crucial, but so too is managing tax amidst complex regulations and demands for transparency.  

What is big data?

Big data is characterised by its high volume, velocity, and variety of formats, making it difficult to process. It includes both structured data, like databases, and unstructured data, like text, images, and video. It requires advanced tools for storage, processing, and analysis.

When it comes to indirect tax management, big data means the vast and diverse data sets collected and analysed by retailers to ensure compliance with tax regulations. From transactional data, product information and supplier records to audit trails, tax exemption certificates, geographic data, and tax data analytics.  

Big trends for big data in retail

1. AI and machine learning to find patterns in customer behaviour and predict future trends
2. Edge computing that processes data closer to where it is generated real-time decision-making becomes a reality
3. Cloud-based software solutions provide scalable storage and powerful analytics tools, making it easier for retailers to manage and analyse big data
4. Real-time analytics means retailers to make quick decisions
5. Blockchain can improve data integrity in big data applications and enhance security and transparency. The flipside is an expectation from tax authorities of greater accuracy and accountability in reporting taxable events.

Tax technology and data analytics can help harness big data to help retailers meet the challenges of indirect tax management including:

• The need to quickly analyse and act on high-quality and accurate data
• Complex tax regulations at local, national, and global levels that require precision and consistency in tax data management
• Data privacy and security regulations like the GDPR and CCPA that shape how your business can collect, store, and use data.

The top 10 of big data for indirect tax management in retail:

1. Transactional data, like sales invoices, receipts, and purchase orders, to track taxable transactions, calculate sales tax, use tax, and VAT liabilities, and ensure compliance.
2. Customer demographics, buying behaviour, and Geographic Information System (GIS) data to determine the tax implications of sales transactions, such as applying the correct tax rates based on jurisdictional requirements.
3. Product and SKU data creates extensive databases of product information, including product descriptions, classifications, and pricing details, to determine the taxability of goods sold.
4. Supplier and vendor data, from invoices, contracts, and payment records, to track purchases, assess indirect tax obligations, and comply with tax reporting requirements.
5. Regulatory compliance data, monitoring changes in tax laws, regulations, and reporting requirements to ensure compliance with evolving tax obligations and avoid penalties.
6. Audit trail data, including transaction logs, user activity records, and system access logs, to show compliance with tax laws, support tax audit defence efforts, and resolve tax disputes with tax authorities.
7. Tax exemption certificate data provided by tax-exempt customers to validate exemption claims, document exemption requirement compliance, and minimise audit risk.
8. Tax-related financial data, such as tax returns, financial statements, and general ledger entries, all need to be integrated to reconcile tax liabilities, track tax payments, and report tax obligations accurately.
9. Predictive analytics models and algorithms to forecast future tax liabilities, identify tax planning opportunities, and mitigate tax risks associated with changes in business operations or market conditions.

Unlocking the power of big data creates new opportunities for business value

Harnessing big data using tax technology and tax data analytics for indirect tax management, can help retailers meet challenges and create business value. Calculate taxes, track tax liabilities, document compliance efforts, administer exemptions, manage jurisdictional tax rates, and forecast future tax obligations. Free up tax professionals to do what they do best: focus their expertise on strategic planning and other higher valued activities.

How do these interrelated trends shape the retail landscape?  

Read our whitepaper - How big data is transforming retail and retail tax functions to uncover four essential tax automation capabilities in the age of big data. Stay informed and use big data to navigate the precision and consistency tax data management requires. Get the right blend of tax technology and tax data analytics, so your business can conquer the hurdles of big data and emerge as a leader in the dynamic and competitive retail landscape. Seize the opportunity to stay ahead.