Improving effectiveness of your tax operations
10 May 2012
CHARLOTTE RUSHTON
MANAGING DIRECTOR, ASIA PACIFIC
Agenda
• Changing tax landscape – opportunities and risks
• Latest innovations in technology – how they can help
• Positioning your business to take advantage of
technology
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Changing tax landscape
– opportunities and risks
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CHANGING TAX LANDSCAPE
Tax departments are performing under multiple pressures
Legislation
Organization
Tax
Resources
External
Tax
Authorities
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CHANGING LANDSCAPE – LEGISLATION
Legislation is frequently changing
• Rate changes
• Rules changes
• New VAT/GST regimes
• Tougher regulation
• Greater disclosure requirements
• Mandated eFiling
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CHANGING LANDSCAPE – ORGANIZATION
Organizational structure and resource cutbacks
• Increasingly global view
• Cost reduction
• Resource availability
• Cash flow focus
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CHANGING LANDSCAPE – TAX AUTHORITIES
Tax authorities are becoming more aggressive
• Sign-off requirements
• More frequent tax audits
• Risk profiling
• System audits
• More sophisticated data analysis
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CHANGING LANDSCAPE – EXTERNAL
Greater External scrutiny
• ERP upgrades
• Media tax interest
• Investor demands
• Greener focus
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Risks
These pressures can result in...
• Stretched tax resources
• Late filing of tax returns
• Human errors
• Missed tax opportunities
• Reduced shareholder value
• Greater exposure during audits
• Impaired relationship with tax authority
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Opportunities
Changes can also bring about opportunities…
• Tax incentives / rulings
• New tax authority initiatives
• Restructuring opportunities
• Rising importance of tax in the boardroom
• Review historic practices:
− Process re-design
− Outsourcing
− Leverage technology
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Changing role of tax professional
External pressures mean tax needs to move from heavy focus on
Tax professionals have to find ways to shift the focus
compliance to strategic, value adding responsibilities
Today
Resources to
focus on
strategic areas
Advanced tools
for analysis and
decision making
Operational
Tasks Automated
StrategyStrategy
and Planning
and
Planning
Analysis and
Optimization
Analysis and
Optimization
Desired
Compliance
Compliance
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Latest innovations in tax technology –
how they can help
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Tax lifecycle
Great potential for reuse of information and decisions
Tax Planning and
Cashflow Management
Transfer Pricing Strategy
Transfer Pricing
Compliance
Tax Provision Calculation
Provisional Tax Returns
Corporate and Indirect
Tax Return Submission
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How can tax technology help?
• Streamline processes, free up staff time
• Eliminate key-person dependency
• Reduce costs through use of outsourcing services
• Improve quality of data
• Improve accessibility to data
• Reduce risk of error
• Improve visibility and control
• Demonstrate control to authorities
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Tax technology tools
A variety of tax software solutions exist
• Tax provisioning
• Tax document and risk management
• Tax research
• Workflow management
• Tax determination systems (‘bolt-ons’)
• Tax compliance
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Tax Provision – Case Study
• Company
– Oil & natural gas drilling contractor
– 25,000 staff
– Operations in US, Middle East, Asia
• Challenges
– Consolidating data from multiple general ledger systems
– Manual spreadsheet calculations
– Time consuming preparation and review
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Tax Provisioning – Case Study
• Solution – Implementation of software tool for
greater automation of tax provisioning process
BENEFITS
BENEFITS
Greater accuracy,
consistency and
transparency
Time saving in domestic tax
provision of 85%
Time saving in international
tax provision of 50%
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Indirect Tax Determination – Case Study
• Company
– Multi-national Fortune 500 Technology Company
– Revenues >$20Bn
– Asia HQ, Operations in 65+ countries
• Challenges
– Maintenance of data for more than 1,500 tax authorities
– Manual processes
– Tax calculations for multiple data sources
– Variety of tax types, including environmental handling
fees
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Indirect Tax Determination – Case Study
• Solution – Implementation of automated indirect
tax determination tool
Tax
Audit
Tax Request
Tax Result
ERP (SAP), legacy,
home-grown apps
Determination
Engine
Reporting
Compliance
BENEFITS
BENEFITS
• Automated tax rule changes for 65 countries
• Increased accuracy and reduced workload of tax department
• Reduced filings and filing adjustments
• Streamlined processes for environmental handling fees
• Minimized need for IT support to manage changes in tax rates and fees
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CASE STUDY – TRANSFER PRICING
• Company
– Software Development and Services
– US Parent with Subsidiaries in Asia
– Related Party Transactions for the Use and Distribution
• Challenges
– Legal Counsel Constructed Terms and Conditions
– Recommended Agreement Structure impacted profitability
of Asia Subsidiaries
– Potential to influence value of IP
transactions with third parties
– Highly Regulated Transaction
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CASE STUDY – IP TRANSFER PRICING
Internal Licensing Example
Third Party
Licensee
1
Licensor
Licensee
Tested Transaction
(Asia Based Sub)
(US)
2
Third Party
Licensor
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CASE STUDY – IP TRANSFER PRICING
External Licensing Example
Licensor
Tested Transaction
(Asia Based Sub)
(US)
Third Party
Licensor
Licensee
Royalty Rates
Third Party
Licensee
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CASE STUDY – IP TRANSFER PRICING
• Solution – IP Transfer pricing software provides global
comparables to influence the firm’s IP Policy
BENEFITS
Corroborating External and
Internal Comparables strengthen
regulatory compliance
Global data proved what the
market would sustain
Satisfied Stakeholders and
Increased Compliance
Over 100K USD of savings to
Asia Subsidiaries
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Positioning your business to take
advantage of technology
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POSITIONING YOUR BUSINESS
• GPS for tax?
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DEVELOP TAX TECHNOLOGY ROADMAP
1. Define the desired future state
2. Understand current state and
prioritize required
improvements
Automated
Determination
End to end
automation
Automated
compliance
Tax data
verification
Tax data
validation
3. Map the path and the steps
to achieve incremental results
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SUMMARY
• Increased pressure on tax from legislation,
organization, tax authorities and other external forces
• Changes create both risks and opportunities
• Tax needs to move from the focus on compliance to
the more strategic value add
• Technology is one way of facilitating this move
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Thank You
QUESTIONS?
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