A tax technology ecosystem starts with a solid foundation—featuring Corptax

PATRICIA:  Hello, and welcome to the KPMG/CSC Corptax Podcast, Tax Talk with Corptax, centered around Using Corptax in your Tax Ecosystem.  Today Kathleen and Brian will be discussing how to create a technology foundation to support your tax life cycle. I’m Patricia Wilson, and I lead the Corptax efforts within our Systems Integration team here at KPMG… we’re glad to have you listening in....

BRIAN:  Clients face several challenges in managing their data and processes in the tax life cycle, especially when having to do so virtually.  It means that tax departments and financial organizations overall are more dependent than ever on multiple technologies, i.e., a “Tax Technology Ecosystem,” to keep everyone and everything connected and properly aligned.  It’s critical that they understand the compliance and reporting requirements, identify the data sources to support those requirements, and have access to a tax technology foundation to store the data so that it’s available when needed and at the appropriate level of detail. 

KATHLEEN:  I totally agree, Brian.  Using technology with a common database for provision and compliance purposes is going to help build the foundation to manage the data. Accessibly through a cloud platform you have options for connectivity to other technologies you can use this combination when you need access to both book and tax data. The common database creates a footprint for reporting, planning, modeling which can feed KPI and other graphics to visualize the outcome of data. With that in mind, it is critical tax departments consider the role of Technology in an overall tax data management strategy.

BRIAN:  Tax Reform has made data management more complex, due to the volume of data points required to facilitate detailed calculations and reporting requirements.  COVID exacerbated it further, with the requirement that everything be done virtually.  Doing things virtually requires a clear and evolving strategy for the Tax Technology Ecosystem, to reduce the risk of gaps in the process or data, as well as addressing other known or unknown challenges when working virtually.  A successful strategy starts with a solid foundation. It means understanding and structuring how data is used multiple times throughout the tax life cycle to minimize and figuring out the best way to facilitate touching the data ONCE for multiple needs to limit needless time reconciling between various systems. You have to identify all data sources, to collect and store them at an appropriate level to support all downstream processes, and to look through to the ultimate use of the data in management reporting and compliance requirements.  Having a central repository, or foundation, for where data is stored, can streamline the process and reduce associated risks that occur when tax and finance departments are relying on multiple disconnected technologies. Kathleen, what requirements are you hearing from Corptax users about how they build out the foundation needed to structure their data?

KATHLEEN:  Talking with tax team starting to build a foundation for tax technology, the first gap to eliminate is the difference in the level of detail when managing the data in multiple systems and building the ability to structure the data to access it at any level needed in subsequent workflows.  You have to strike a balance between the level of granularity needed vs. the various calculations the data needs to support. , aggregating from source systems, without losing the granularity needed for later processes.  Due to the expansion within compliance reporting such as GILTI, FDII, FTC calculations, aggregating the data for forms and new schedules and upcoming changes, and planning for the requirements and level of data for forecast. A foundation needs to start with a centralized storage point for the growing amount of data.

Start at the beginning with the entity, and define common profiles, adjustments, amounts, and attributes to be shared across multiple calculations. The common archetypes combined with the entity create a foundation to bring data in at any level. Your source data is structure to support an organization’s reporting requirements for compliance and provision.

BRIAN:  Kathleen you mentioned starting with the entity, and the level needed to compute and store results.  We at KPMG Ignition work with many clients experiencing organizational changes, spin off a business segments, or making large acquisitions.  We’re assisting them with integrating a new structure into the existing technology footprint or redefining the process and configuration for a more efficient approach which also includes how to address the evolving needs for modeling and planning.  How do you see Corptax addressing a similar change in structure and size?

KATHLEEN:  At Corptax we understand Scalability should be consider from the beginning, even before structural changes have occurred.  An effective foundation will be able to evolve and/or grow with your needs, allowing you to take baby steps as you start your journey, then expand as needed to address changes in size and/or complexity.  With even more change on the horizon due to released regulations and other potential changes in tax law, your foundation needs to support your ability to adapt to how you use the data.  You want to be able to standardize and apply rules for different reporting at that lowest level of detail as previously identified, which helps standardize the process for digesting new entities and calculation requirements.  If you consider the expanded international tax calculations use the same source data that supports your provision calculations, you can easily scale your outcomes without changing the source of the truth.

BRIAN:  Great points, Kathleen.  At KPMG, we’ve used that same approach when using a client’s Corptax environment to support analyses by our M&A teams to assess proposed changes to organizational structure, then also to support the GAAP requirements related to the reporting that might be required, such as quantifying the tax expense or benefit properly allocated to discontinued operations.  Leveraging the data that’s already available and structured so that it supports all aspects of a tax life cycle and assures reliable results and helps facilitate additional automation capabilities.

I’d like to dial into another point you raised, that the same data feeds different calculations.  How critical is it to have underlying data within the system to allow for real time drill down capabilities?

KATHLEEN It creates significant efficiencies if the data needed to support calculations is in the database, as opposed to just storing the results outside of the system for the underlying detail.  All of the data is interconnected in some way, whether used for compliance, for provision, or for planning; there are data dependencies at multiple levels. Relying on multiple systems can cause you to lose visibility back to the source and make it difficult to reconcile data between the different platforms. Examine your gaps between the different platforms and determine where a single solution can help reduce silos and automate the data for consumption across your tax calculations.  Leveraging a tax database solution like Corptax can add more automation and efficiencies, and align compliance and provision, it starts by creating a foundation with source data using a, common profiles, common administration and common data base.

BRIAN:  Thanks, Kathleen.  Patricia, back to you.

PATRICIA:  Thank you Kathleen and Brian for your insights, and thank you to those for listening in to Tax Talk with Corptax.. We look forward to having you join us for our next podcast, which will continue our discussion on data, and how to overcome cumbersome data dependencies.