The digitisation of tax is a major development worldwide - benefiting not just tax authorities but the companies which meet their demands.
E-filing, e-reporting, e-audits - it is easy to see why digitisation is popular with the authorities. It gives access to both more detailed and summarised information, which their systems collate in near real-time. This allows them to drill deeper, identify mismatches and identify the inconsistencies between companies' tax declarations. It should also reduce the cost of revenue collection.
For companies having to comply with new regulations in multiple jurisdictions, it can be daunting. However, our experience helping multinationals demonstrates that digital tax and accounting systems can deliver cost benefits for the authorities and the companies assessed. By ensuring that global platforms respond to local requirements, companies can make tax digitisation integral to their wider automation strategy. Streamlining tax and accounting processes before a technology implementation reaps the greatest reward.
Brazil was one of the first countries to move to a digital tax system some 20 years ago and remains the most advanced. Corporate taxpayers must communicate every transaction in an electronic format.
Today, the authorities are using the enormous amount of data collected since 2000 to search for errors - deliberate or otherwise. In future, it is likely that e-audits will be triggered when things don't add up.
Companies' software must meet all Brazilian requirements. Multinationals will want to utilise their existing global accounting platforms as far as possible in dealing with tax. In practice, they will need to add a raft of locally-specific tools. It is extremely important to obtain a detailed understanding of local compliance regulations and check that existing software providers can meet requirements.
Local expertise can help avoid other pitfalls. Tax registration is a lengthy process in terms of process steps and creating the interface with the tax authority platform. Also, even if no transactions have taken place, companies must file a tax return once they have set themselves up. In our experience, companies and multinationals often presume the opposite - and can find themselves falling foul of the law.
In mainland China, many clients face significant challenges when starting out. All businesses must use government-certified tax software - known as Golden Tax -...