Transforming Taxation: The Crucial Role of Technology
Digitalization has become increasingly important since the pandemic hit in 2019. Many organizations that were previously hesitant to adopt technology do not have a choice but to digitalize their systems and processes. Taxation service providers are using technologies such as cloud computing, Robotic Process Automation (RPA), Artificial Intelligence (AI), and Machine Learning (ML) to streamline various functions. The taxation function is no exception and requires technological intervention to address its inherent complexities.
Challenges Faced by Tax Professionals
Updates in tax laws and accounting standards impact the tax function. Tax professionals must track and manage the receipt, processing, and retention of data and relevant documents. Global tax requirements are becoming more complex as human resources are geographically dispersed. Tax professionals must collaborate with external and internal stakeholders to share data, track responses, and ensure compliance. The tax function requires accurate data to be stored and made available for routine audits, compliance, and other purposes.
Benefits of Technology in Taxation
Technology comes as a respite to tax professionals by offering tools to streamline the taxation process. Here are some of the benefits of using technology in taxation:
Enhances operational efficiency
Standardizes different tax processes
Facilitates consistent execution across tax periods
Enables tax professionals to access information on the move
Automates routine processes, eliminating human errors and enhancing the speed
Performs large-scale data processing efficiently and provides valuable insights to tax professionals
Streamlines data management, making it easy to access and use data
Enables access to analytics and reports that help measure performance metrics
Facilitates seamless collaboration between stakeholders
Frees up tax professionals from mundane tasks, allowing them to work on critical aspects of taxation
Factors to Consider Before Adopting Technology in Taxation
Adopting technology for taxation is not a standalone aspect of a business. Tax is an interdisciplinary function that involves departments such as treasury, legal, finance, operations, etc. Therefore, technology adoption for taxation will depend on the extent of technological intervention in other departments. The tax department must create a list of processes they will upgrade using technology. For instance, RPA can be used to automate routine processes. Organizations must select the correct type of technology to enhance the efficiency of different tax processes. Adopting technology will impact the organizational structure and the skill sets of tax professionals. The organization will need tax professionals who can collaborate with technology for better outcomes. Investment in technology has substantial cost implications. Therefore, conducting a cost-benefit analysis before investing is a good idea.
Conclusion
In the digital era, technology is vital in streamlining different organizational functions. Taxation is a complex function, impacted not only by the internal functioning of the organization but also by external changes in tax laws and updates. Manual systems are tedious and prone to errors. Technological intervention can eliminate these errors and speed up the process. Besides, technology can make the taxation function agile, enabling it to respond quickly to changes in an organization's internal or external environment. Adopting technology for taxation will benefit organizations by enhancing operational efficiency, standardizing tax processes, and providing valuable insights to tax professionals. However, it is essential to consider the abovementioned factors before investing in technology for taxation.