26 Jul, 2022
Digital taxation platforms weren’t something that Sakichi Toyoda was considering when, almost a century ago, he adopted the concept of JIT manufacturing for his own Japan-based manufacturing facility. Since then, we’ve seen various concepts of lean, but no two years have delivered a greater insight into what lean production really means (both the positives and the pitfalls) than these last two years.
Manufacturers have experienced stock shortages, transportation delays, staffing issues, and unanticipated legislation changes. And it isn’t just manufacturers that have experienced this chaos. The service industry has been hit too, with backlogs in everything from driving test provision to tax administration. In fact, as the world struggles to identify the most effective way they can ensure the continuation of services in such situations, digitalization, machine learning, and artificial intelligence have stepped up.
At the very heart of the lean concept is the philosophy of Kaizen, (continuous improvement) and it seems that digitalization is the next logical step in that process. However, it’s essential to understand the process and how to lay the strongest possible foundations to enable you to unlock the greatest value possible from your SAP® S/4 HANA digital taxation platform. If you’re considering implementing an ERP solution to facilitate faster, easier, and more efficient user-friendly tax administration in your country, we have some pointers from one of our experienced digital tax solution architects.
1. Ensure your master data model reflects your organizational operations
Before going any further it’s critical to establish a strong foundational structure for your master data model.
Before implementing a new digital tax platform, model how you’ll accurately reflect the relational data collected for each entity and each transaction.
One of the key benefits of using SAP® S/4 HANA is its flexibility, which enables users to easily model different operational structures. Ensuring that your master data model accurately reflects the entity data that you collect is the only way to ensure clean and reliable data necessary to secure that 360° visibility that drives so many of the benefits a digital tax platform can offer.
2. Establish a separate data cleansing project early on
Poor data can lead to substantial delays in your migration project. Duplicate records could result in issues such as duplicate bills raised, or interest calculated and applied twice, completely undermining the integrity of the system and destroying critical stakeholder support for the project early on.
Ensuring data quality as data is integrated in the very best way to avoid last-minute surprises. Establish a data cleansing project very early on in the overall ERP integration that should run independently, eliminating duplicates and checking the quality of the data held.
Work alongside your ERP integration partner who should be able to provide you with ETL (extraction, tallying, and loading) tools and a migration cockpit to put you in control of the data you’re migrating.
3. Integrate with data partners
Integration is one of the huge time-efficiency benefits of an intelligent ERP tax platform like SAP® S/4 HANA, however, integrating with other data partners is essential for the optimal realization of these benefits. If you work closely with other government departments or external bodies, integrating your digital tax platform opens a wider range of workflow and automation capabilities that will save you time and increase compliance and revenue collection.
4. Review existing processes and redesign them
When launching a digital tax platform there’s the opportunity to embrace new working processes to save time and money. To capitalize on these, you need to be willing to adapt. Sticking with your existing practices and procedures once your digital tax platform is in place would be like investing in a car to save catching the bus, then continuing to take the bus whilst the car sits in the driveway.
Without a willingness to lean on business rules to make decisions and embracing technological opportunities such as self-service data inputting, automation, and data verification, your organization will be unable to derive the full benefits of a digitalized tax platform.
5. Transfer all data entry tasks to the taxpayer
Encouraging the taxpayer to take ownership of their own data entry reduces the administrative burden and increases the quality of the data fed into the platform. Responsibility for accurate data inputting is passed to the taxpayers, so it’s up to each individual to ensure that they pay the correct tax and don’t incur either additional costs from unpaid or late taxes or make overpayments.
6. Automate your processes
By automating the processes you can, you don’t simply reduce the administrative burden on tax officers; you also reduce the accompanying administrative cost and improve data quality.
Automation offers new opportunities to work more proactively too. Instead of waiting until someone defaults on a payment, those who typically default can be identified in advance and an automated email sent to encourage payment, driving up compliance and making revenue collection easier.
7. Empower the taxpayer with self-serve capabilities
With a tax payment platform that integrates automated processes, tax agencies often find that compliance also increases, growing the revenue generated by taxes and levies and reducing the manpower required in chasing debtors.
Placing responsibility for data entry firmly on the shoulders of the taxpayer reduces the administrative burden and the costs that come with it and minimizes errors made in data entry. Transferring responsibility can even increase compliance with tax regulations.
8. Make payments simple
Like any customer-focused system, the easier payments are to make, the more likely it is that your customers or taxpayers will make payments on time. A digital tax platform enables you to forget anarchic tax payment solutions that may involve citizens queueing at post offices or ATMs, instead opting for easy payment solutions that can be instructed any time of the night or day without the taxpayer even leaving the house.
9. Use a standard system with accelerators and avoid bespoke coding
The integration of a new code presents a series of challenges to those adopting a new tax administration platform. New code isn’t just costly to create, it also requires comprehensive testing, which increases rollout and testing times.
With systems that include bespoke coding, organizational and legislative changes can pose a challenge. Additional code needs to be created and, if the person who wrote the original code isn’t on hand, the original code may need to be manipulated before additional code can be added. This can make the system less stable and more complicated. For more about the implications of creating bespoke code and how accelerators can be used to deliver projects faster and more effectively, read our blog ‘Embracing accelerators to boost stability and slash roll-out times’.
10. Empower your tax agents
Working with tax agents, accountants or auditors is, for many citizens, an important element of being able to file tax returns and pay taxes. By empowering your tax agents and auditors to help the tax agency collect data and information, you’ll be helping your citizens seek the support they need to file their tax returns correctly.
You can choose whether you simply enable tax agents to access and edit their clients’ tax data through a portal, or whether you go one step further and offer a pairing service that matches tax agents or accountants with those looking for representation according to specialisms.
11. Ensure your legislation is flexible
Often tax legislation can be strict but making legislation flexible enough to allow for the incorporation of a digital tax platform is an essential part of a smooth rollout.
Any major tax reform plans will need to be put on hold during the build and rollout to ensure that any changes are applied at an appropriate point in the rollout, through the introduction of a new set of business rules.
12. Integrate e-invoicing capabilities
Introducing e-invoicing to increase tax revenue and GST/VAT compliance will enable you to capitalize fully on the introduction of your digital tax platform. With e-invoicing, tax data and payments are automatically channeled to the tax agency at the point of purchase. This means tax returns can be pre-filled and compliance with taxes and levies becomes quicker and easier. With seamless payments, revenue collection is faster and smoother, and the taxation authorities can budget more effectively, confident in the income generated at any one particular point in time.
However far you choose to take the integration of your digital platform, adhering to best practices is essential if you’re to avoid longer-term challenges that could require costly intervention. By ensuring that you take time to ensure the foundations of the digital tax platform are strong and robust, reflecting business operations, the system is likely to be more stable and deliver optimal return on investment, providing a better user experience for your tax agents and citizens.
When choosing a partner to work with, consider their experience with rolling out digital tax platforms as this will not only mean that you have more highly skilled engineers that specialize in your type of project, working on your platform, but it will also impact your access to resources such as accelerators that will save you time and money during the integration process and beyond.
If you’d like to discuss how invenioLSI can support you in taking your tax platform online and help you get the most from your solution in terms of cost, benefit, and return on investment, contact us today.