Insights

Data analysis by using ERP

An ERP system that is implemented and configured well can serve as a solid single source of truth enabling actionable insights into your tax position.

More and better insight in your tax position

Although in the past the focus was often on collecting the right data and preparing the right calculations and returns, with a proper configuration of your ERP system you can easily shift your attention to gaining better insights into your tax position through data analytics.

Having a tax sensitised ERP configuration in place will increase the reliability of figures, which will allow:

Implementation of data analytics tools to provide meaningful insights to assist in the decision-making process in areas such as detection of risk, opportunity identification, projections and scenario planning, and overall business support

Making use of standardised ERP reports and saving time crunching data
Detecting any anomalies at an earlier stage. For example to timely correct for any required TP adjustments
To better predict and prepare any tax forecasts

By improving insight in your tax position, you can increase the added value of your tax department. We will gladly support you in the process of gaining more insight.

Indirect tax

Data analysis offers opportunities

There are many ways to utilise data analytics to get better insight in and control over your company’s indirect tax position. With the use of data analytics you can verify the indirect tax treatment applied on the incoming and outgoing transactions and you can identify the shortcomings of indirect tax setup in your company’s ERP system. Besides, it can give you insight into the supply chain and helps to identify business process improvement opportunities. It is also possible to identify master data quality improvements, cash flow opportunities and indirect tax savings. The use of data analytics can help the indirect tax department to build a business case for improvement of the standard indirect tax setup of the ERP system or even the implementation of a tax engine.

Healthcheck and continuous monitoring

Data analytics can be used in two ways: (1) as a one-time health check or (2) as continuous monitoring solution. In case of continuous monitoring, the data analytics can for example be used as a check before filing returns to the tax authorities in order to ensure the data submitted is correct. Examples of checks that can be done when performing data analytics are the availability of an EU VAT registration number of the customer in case of an intra community sale or checking the indirect tax treatment of complex (multiple party) supply chain flows. Another example is using data analytics to validate your customer master data by checking if all EU customers have a VAT registration number setup in the ERP system and validate these numbers in the VIES database. These are just some examples of data analytics in the field of indirect tax, depending on the objectives, your company can use data analytics to its own advantage.

Direct tax

Data accuracy and completeness for data analysis

It is expected that the vast majority of tax functions will rely on professional data analysis tools in the future to assist in the decision-making process in areas such as detection of risk (uncertain tax positions), opportunity identification, projections (e.g. to meet IAS 34 requirements and/or ETR forecasts, i.e. ability to model tax consequences of changes to the business model and structure), scenario planning, and overall business support. In this respect it is of great importance that the underlying data and calculations are accurate and complete. As a result thereof Companies would be able to increase their visibility throughout the end-to-end tax lifecycle process and create a better audit trail between source data and consolidated tax disclosures. The integration of tax data will help optimise the tax accounting process and maximise the time spent on value added activities such as data analysis and review.

Realtime reporting

Next to that, given the fact that tax authorities are more and more focusing on real time reporting, it would be extremely important for Companies to be in control and have a centralised visibility over the entire tax position and the underlying tax-relevant data.

In this respect it is therefore important to consider any data analytics solutions to capture both external as well as management reporting requirements and the integration thereof during the implementation or upgrade of your ERP system. In order to obtain meaningful insight in the tax position the underlying data set-up as well as calculation methodology should be properly embedded in the ERP system.

Transfer pricing

Managing risks and seeing opportunities

Tax departments that are in the process of defining requirements as part of an ERP transformation, should also consider which transfer pricing insights they would like to have at their fingertips to better manage transfer pricing risks and identify opportunities. Having access to transfer pricing data is not enough to bring about improvements to your transfer pricing position; data needs to be transformed into actionable insights through data analytics and visualisation. Such analytics should enable the tax department to understand trends and anomalies (e.g. through year-on-year comparisons), and to be able to ask the right questions to the business to subsequently decide how to respond to identified potential risks.

Appropriate solution for data analysis

Starting point is to define what risks the tax department wants to be able to spot, and which data is needed to evaluate these risks. This will typically include the analytics that provide the tax department with the ability to monitor profitability margins throughout the year and to spot changes in intercompany flows that require transfer pricing analysis. Next, the frequency and timing of analytics (i.e. monthly, quarterly, etc.) should be decided, taking into account the company’s accounting policies (e.g. is all the required data available throughout the year or only at certain times?). Finally, depending on the level of complexity, a fitting approach to transform and visualise the data needs to be established. PwC supports companies in selecting a fitting solution for data analytics and visualisation. Oftimes, it is possible to leverage software licences that are already available within the company.