Time to make global transaction tax compliance a breeze, not a burden

Taxes may not be the biggest icebreaker in a conversation, but they’re certainly something that cannot be ignored. As companies grow larger and scale outside of their home countries, tax compliance becomes one of the most important yet complex processes.

Speaking to Wyatt Edge-Morgan, Workday financials practice lead at the specialist consultancy CloudRock, ERP Today investigates what exactly comprises global tax challenges and how to tackle them with modern technology.

Geography and legacy problems

As explained by Edge-Morgan, tax is neither a simple matter nor an option, especially when it comes to multinational organizations: “While North America and ANZ bask in relative simplicity, the EU conceals many different variations despite a single wrapper, with added interest from the CEE members just embarking on their tax reform journey.

“Latin America and Asia bring an escalation in complexity; composite tax coding, monthly rate definitions, progressive or cumulative withholding taxes and rigid exchange rate requirements, all published in detailed external reports which threaten to be matched with returns filed by other taxpayers.”

Sometimes, he added, “the issue can also be in how difficult it is to separate an actual legal requirement from a set of conventions or preferences.”

On top of the geographical legal discrepancies, many businesses struggle with disparate financial systems based on legacy platforms, which create additional complexity in effectively reporting taxes across all countries.

Utilizing the three-stage tax transformation journey

To tackle these challenges, Edge-Morgan recommends looking at the tax optimization journey through three stages – basic compliance, improvement and transformation – which can help the indirect tax department reposition itself from focusing on basic compliance to shaping and enhancing business operations.

This way, each stage would be responsible for the following: basic compliance would allow the department to calculate and capture taxes correctly, catch forgotten reverse charges, report on time and avoid penalties; improvement would help reduce tax costs by maximizing VAT recovery and avoiding unnecessary taxes; and transformation would leverage analytics to change business practices in order to eliminate tax-unfriendly transactions involving high-tax countries.

Recruiting Workday Financial Management

Of course, as with any tax-related issue, it may sound like implementing the three-stage global tax compliance is easier said than done. However, with modern solutions like Workday Financial Management, organizations can achieve a much easier and more efficient process.

Specifically, the software allows every transaction line to retain its own tax treatment with each tax component reported separately. This means that different tax point dates, tax rates, tax credit recoveries and accounting treatments can be assigned to each line.

Edge-Morgan explained: “A multi-dimensional transaction tax defaulting framework, built upon a standardized tax configuration, removes the guesswork from transaction capture, facilitating shared services by incorporating tax coding expertise in system rules. Tax professionals don’t have to review every transaction, they can concentrate on the exceptions.”

He added: “In the last several years, Workday Financial Management software has been dramatically improved, and the tax product has been enhanced more than any other functional area, making it now the most flexible and powerful transaction tax engine amongst the tier 1 financial software products.”

However, the prospect of adopting completely new software may seem daunting, which is why organizations are encouraged to seek help from specialists like CloudRock. With the team of program and project managers, solution architects, functional experts and change and transformation leads, businesses can find the most suitable way of implementing Workday Financial Management, finally achieving a seamless experience in global transaction tax compliance.