How often does your tax administration review its business processes? Do you recognise the drivers behind them? Have you tracked which processes are required by legislation, or are backed by rules and regulations? Do they implement any internal policies? Or is it simply done ‘because we’ve always done it this way’?
To enhance process efficiency, reduce risks and increase quality, tax agencies are increasingly turning to business process re-engineering (BPR). BPR consists of an in-depth assessment of challenges, processes, risks, and controls, and a development plan to align practices with your tax function's goals and strategy. A successful project often results in a reduction of manual processes and an increase in automated processes and workflows, ultimately saving plenty of time and resources.
There’s never a bad time to look at the controlling factors behind your operations and determine areas of flexibility. Each tax agency should conduct this review based on a regular schedule. Often this review only takes place when implementing, or transitioning to, a new enterprise solution.
Identifying controlling factors
If you’re conducting a process review for the first time in a while, or during your digital transformation, it’s critical that you and your chosen vendor can recognise key distinctions behind each process; whether that’s legislations, rules, regulations or internal policies. This means key stakeholders across all layers of the organisation must be engaged and work collaboratively throughout the implementation.
To create process efficiencies, the ‘process explanation’ part is key – this is where areas with higher flexibility become visible and provide opportunities to create improvements. This part should entail discussions about operational challenges faced, processes, risks, and controls. Your tax function must also map existing processes to the new capabilities your solution offers.
If you’re going through a transition, then your new solution may offer better processes than previous review attempts. For example, a Commercial-Off-The-Shelf (COTS) solution, which leverages SAP’s TRM platform based on S/4HANA®, offers configurations which meet tax-specific laws, regulations and business rules. COTS solutions can accommodate different processes within their overall design and come with many tools and methodologies to assist in the process.
Tax policies have evolved rapidly in recent years and affected tax houses are facing demands to quickly align operations to meet compliance. For example, the Gulf Cooperation Council (GCC) adopted VAT in 2016 in efforts to broaden tax bases and reduce reliance on natural resource revenues. Since, Saudi Arabia, the United Arab Emirates (UAE) and Bahrain have already aligned and implemented online systems for filing and paying VAT, in line with best practice.
Simply put, tax agencies cannot afford to fail to comply with statutory obligations, so it’s never good practice to configure your solution based on the assumption of having a statute changed. Statutory requirements aren’t changed often and attempting to drive such a change is never a given, nor an easy task. If the vendor’s response is, ‘we will get the law changed’ then you have cause for concern.
Rules and regulations may be more flexible, but still require rationale and justification to change. A change can only occur if the request remains within the required statutory framework. Additionally, this should only be initiated if it’s truly an improvement to the process and doesn’t negatively impact stakeholders.
Internal policies can provide more flexibility, but some jurisdictions operate under legal frameworks which require all policies to be executed as formal rules or regulations. If your jurisdiction does permit more flexibility you should still conduct a review of your process through a similar lens. Is the change being made purely to accommodate the new solution, or is it to bring higher levels of efficiency across your tax function’s business processes? It’s imperative to assess the impact to stakeholders when conducting your review.
The right solution will meet your tax needs, not the other way around
A customised system can leave you having to rely on one implementation partner for all future support. You’re then left with an expensive, long-term solution and a hope that the solution works well in the future, and that the vendor continues to support it.
Your tax function needs a highly configurable solution, with the flexibility to operate within your legal framework. You want an implementation which allows your team to maintain it inhouse and offers you the option to choose an experienced vendor to help. If you take the vendor route, ideally, it should be an expert integrator who can prepare your team to handle maintenance but is also willing to handle it for you.
Your partner should have in-depth experience, who knows how to read between the lines and ask the right questions to identify key distinctions across your tax organisation. Asking the right questions means getting the right recommendations, to enhance business processes and to configure your solution to meet your tax needs, first time around.
Learn how our experts implemented a state-of-the-art COTS solution to help Fiji Revenue and Customs Services (FRCS) improve business processes and enable online taxpayer services, voluntary compliance and self-assessment environments.