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Indirect tax data analyticsDelivering value through business intelligence
Harnessing the power of the information you hold lets you dig deeper into your indirect tax profile and uncover hidden costs, risks and opportunities. Effective harvesting and analysis of indirect tax data can bridge the gap between operations, compliance and strategy by gaining visibility, control and insight. Managing indirect tax data is — and will continue to be — the key to aligning indirect taxes to the strategic goals of the business.
Indirect tax data analytics
Gaining insight and control.Reducing risk.Enhancing performance.
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Indirect tax data analytics
Gaining insight and control of indirect taxes in the digital age
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External driversGovernments are relying more than ever on indirect taxes - such as value-added tax (VAT) goods and services tax (GST), and customs and excise duties - to meet their budgetary needs. VAT rates have increased worldwide and new indirect taxes are being introduced in many countries for sectors such as banking and energy.
As a result, tax and customs administrations are focusing more than ever on indirect tax compliance. They are collecting more information about taxpayers’ activities and they are doing more with it – sharing data and using advanced technologies to detect errors, analyze transactions, compare taxpayers and carry out risk-based audits. And they increasingly expect businesses to take full responsibility for indirect tax compliance and control.
At the same time, the “fair tax” debate has put companies’ tax affairs firmly in the spotlight - drawing intense scrutiny not only from tax administrations, but also from regulators, investors, the media and the public. Tax transparency
is higher on the corporate agenda than ever before – forcing tax and trade functions to have a better handle not only on the numbers but on the underlying transactions too.
Internal driversThe spread of globalization has increased the volume and complexity of global trade. At the same time, organizational models are increasingly being centralized and streamlined, with many companies using shared services and outsourcing to complete their customs declarations and indirect tax returns. As a result, tax and finance functions are undergoing radical change. They are being challenged to “do more with less” – not only to report accurately but also to provide insights and savings that contribute to the company’s success.
Technology enablersIn the past, gaining global visibility over indirect taxes was difficult to achieve. However, advances in technology, the widespread use of the Internet and
the increased availability of desktop applications have changed the tax landscape dramatically. Business intelligence tools can now help to manage tax compliance processes and analyze large amounts of transactional data from multiple sources to inform your business decisions. They can help you to identify and remediate past issues, prevent errors and facilitate planning for future changes.
What are your drivers for indirect tax technology?Each organization has its own unique business drivers and goals – and its own unique indirect tax risks and opportunities. You may be concerned about reputational risk or underlying issues. You may be focused on growth and how duty savings can support business expansion. You may want to free up cash. Or you may want to improve your relationship with the tax administration or support your position. Whatever the driver, our approach to indirect taxes can help you address the issues and meet your goals.
Having accurate global indirect tax data for your business - and examining it critically - has never been more important. What are the internal and external pressures that are driving this trend? And how can you respond?
Have you thought about ...How much control and visibility you have over the key indirect tax numbers, cash flows and metrics?
Whether you have all the information you need to manage indirect taxes effectively?
Whether your ERP systems are 100% compliant with local indirect tax requirements? Are you paying the right amount of tax? How do you know?
►Your goals for indirect tax management? Are you meeting or exceeding them?
How you can identify errors and their root causes before your declarations are submitted?
Whether you have unrealised savings opportunities?
How you could use your resources more effectively?
How future changes will impact your business?
How technology could improve your reporting processes, reduce your costs and manage your risks?
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The challenge of big data is also its opportunity.
ManageData
Relevant data
Insights
Appropriate data sources
Business intelligence and reporting
Transaction / behaviour history
Continuous feedback loop
PerformAnalytics
DriveDecisions
ImprovePerformance
ManageRisk
Indirect tax data analytics
How we can help
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At EY we have extensive experience of helping clients use data analytics and business intelligence tools to manage indirect tax filings, remediate past issues and plan for future changes.
We can analyze data from single or multiple sources to identify and remediate errors and weaknesses in historic filings and declarations.
We can identify errors with your ERP systems configuration and assess the effectiveness of your indirect tax processes and controls.
We can identify cost savings and improvements to working capital.
We can map the possible impact of future changes on your indirect tax position, cash flow and costs.
And we can use the latest business intelligence platforms to embed all of the above into a single compliance, control and reporting tool tailored to your specific business needs.
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05We can help you extract transactional and logistics data from your own systems and use our proprietary analytics tools to deliver insight and value as part of a one-off consulting engagement – this is the offering that we refer to below as “EY Indirect Tax Data Analytics”.
Alternatively, as part of our “Indirect Tax Business Intelligence” offering, we can help you design and build Indirect Tax reporting and analytic platforms that replicate the functionality of our own tools, but which sit within your own systems landscape and provide you with insight, visibility and control on an ongoing basis.
We have a proven indirect tax approach that allows companies to take control over their risks and access Indirect Tax saving opportunities. It challenges the concept of “what you see is what you get” by enabling you to look in detail at each business transaction.
The support we provide to clients typically takes one of two forms:
How we can help Indirect tax data analytics
A proven indirect tax approach
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EY Indirect Tax Data Analytics Indirect Tax Business Intelligence
How we can help Indirect tax data analytics
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This methodology has been developed by EY professionals with experience in IT, risk assurance, audit and indirect tax consultancy. Our holistic approach allows us to analyze transactional data derived from different sources in your company’s ERP platform(s) to determine the VAT relevance of a range of financial postings – even entries that are not recorded for indirect tax purposes.
Transaction analysis tests covering accounts payable (AP), accounts receivable (AR), intercompany transactions, general ledger (GL) and journal postings help to detect potential errors in coding and indirect tax accounting. Our tool not only identifies and records possible errors, it also classifies them according to their root causes – allowing for more effective remediation. The output can be provided in both graphical and data format with the ability to drill down to specific transactions or transactional scenarios.
Supply chain analysisBy analyzing raw transactional data from your ERP system, we can help you produce a complete overview of your whole supply chain to determine the
expected tax treatment of transactions to highlight potential discrepancies and identify efficiencies and savings.
Free trade agreement and customs regimes analysisAs part of our EY Indirect Tax Data Analytics offering, our Global Trade team has developed tools that can analyse and remodel trade routes, allowing you to identify, and tap into, customs duty benefits such as exemptions, preferential duty rates and duty drawback schemes.
By using these tools we can work closely with clients to quantify the potential benefits of eliminating duty leakages and exploring optimization opportunities. The analysis can also be used to measure customs risks and resource requirements across a region or globally.
Enhanced indirect tax reportingExpanding the capabilities of your existing reporting tools can help to enhance your VAT return processes. Examples include replacing multiple in-country VAT return spread sheets with a single reporting application built on a third-party Business Intelligence platform. By exploiting the capabilities of market-leading BI technology you can automatically review many thousands of line items to identify potential coding errors for each territory, build control and exception reports that are tailored to your specific risk profile, incorporate regional and global dash boarding (see below), as well as enable an end-to-end VAT and GST compliance solution.
Dash boardingMonitoring tools can help you analyze your key indirect tax metrics (such as, VAT throughput, trend analysis, VAT receivables and VAT return totals). Dash-boards can provide “at a glance” updates over key performance indicators across the whole spectrum of indirect tax management including VAT/GST rates, input tax recovery, compliance
status, revenue authority penalties and liabilities. At EY we can help you build and host your own indirect tax management dash boards, alternatively we can use our Client Portal to host securely indirect tax management dash boards that are specific to your business and which you can access from any global location.
Risk analysis and monitoringIn-depth risk reports and monitoring tools can highlight potential irregularities and risks; we can help you develop “heat map” tools that work on a real-time basis to identify local control weaknesses before returns are filed; we can help you embed our worldwide VAT/GST tracker tool into your dashboard to help you proactively monitor changes in rates, tax systems and thresholds; and we can help you build control monitoring tools (CCM) that enable your tax functions and senior management to monitor indirect tax performance, risks and opportunities, as they arise.
We can help you deliver insight and value from your indirect tax data using our proprietary analytics tools.
We can help you to source appropriate software and build business intelligence tools for you to meet your indirect tax business needs.
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Limited use of data analytics in tax compliance process
Simple spreadsheet formulas and tables
Limited number of automated controls
Rigid standard reports
Data
ana
lytic
s m
atur
ity m
odel
Use of data analytics in indirect tax compliance process
Use of additional BI tools (in house or through a third party) to run periodic “deep dive” analytics
Ad hoc and not fully integrated into tax reporting process
Limited formal links between data analytics findings and filed tax numbers
Use of custom-built BI functionality as part of regulartax reporting process
Exception reports created across all business units
Flexible reports/dash boarding to identify areas of cash opportunity and also areas of tax risk.
BI functionality within existing ERP environment
Flexible analytics available to all tax and finance users
Adjustments automated as far as possible.
Real-time monitoring of key compliance processes
BI functionality available through mobile/tablet applications
Structured and unstructured analytics
Real-time monitoring with alerts
Flexible, intuitive and interactive reports.
Simple
Developing
Leading practice
Advanced The Future
2.3How we can help Indirect tax data analytics
The indirect tax technology journeyBusinesses change, technology improves, indirect taxes change and tax administrations adopt new policies and procedures. You have to keep pace. As these demands evolve, your technology needs may also change. As you seek visibility, stability and certainty around basic data and processes, what is a “nice to have” today is likely to become a “must-have” tomorrow! Gaining oversight and control of indirect taxes is not a one-off activity. Rather it is a journey. First steps may involve using simple tracking tools, further down the road, it may involve process improvements and data analysis or the implementation of market-leading technologies. Wherever you are on this journey, wherever you want to go, EY can help you every step of the way.
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EY Indirect tax data analytics
Business Intelligence reporting tool
AP/AR analysis suite
A global pharmaceutical company was spending a significant amount of time on its VAT compliance without reasonable assurance over the correctness and completeness. We extracted a comprehensive dataset from its system and analyzed it order to review processes, G/L-accounts and country specifics to quantify both risk and opportunity. Where material risks were identified, we determined their root cause empowering our client to remediate them (be it in terms of greater automation or improved process). This solution will now be rolled out to other countries, including jurisdictions in Latin America.
A global pharmaceutical company was looking for a VAT reporting and control solution to deploy at their Shared Service Centre. We helped the client’s tax, finance and IT teams to evaluate the options available. We then helped them design and build a multi-country indirect tax reporting and control tool on a third-party BI platform, incorporating transaction-level exception reports, reconciliation reports and dashboards. The tool, which can be accessed by multiple users in different geographic locations, is tailored specifically to the client’s operating model, risk profile and control needs.
A European service provider required a suite of automated AP/AR analysis routines in-house indirect tax function to improve and enhance statistical analysis and oversight. We worked closely with the organization’s indirect tax, IT, and ERP teams to first develop custom-made tests and then deploy the technology in a global shared services center. The shared services center now uses the application each month to support its indirect tax compliance processes.
European-wide transaction tax code validation
Procure-to-pay review for a multinational bank
Automated supply chain mapping
Landed-cost duty analysis
A leading global news and information provider required a pan-European add-on for its spread sheet software to validate tax codes before completing its VAT returns. The software we deployed for the company allows users to quickly review codes and easily generate a validation report annotated with comments automatically assigned to the transactions. The tool has reduced the number of transaction lines that need detailed manual review by more than 90%.
EY was engaged by a US headquartered bank to review its partial exemption recovery method and analyze AP data within its procure-to-pay system. Using our data analytics approach, we identified, quantified and qualified retrospective VAT claims, VAT overcharged by suppliers, avoidable costs and future reclaim opportunities. We then negotiated with a number of tax administrations and suppliers to realize substantial VAT and other savings. In addition, changes to the partial exemption method are expected to yield higher input VAT recovery rates for the bank in the future.
We provided a global electronics company with a detailed analysis of its current supply chain. Our approach identified the underlying transactional elements in the company’s ERP system. We then used technology to combine information from many disparate sources to create a complete picture. The software also identified the historic VAT treatment of each transaction, allowing the company to identify and rectify potential coding anomalies.
For clients in the chemicals, tobacco and power generation industries, we have examined tariff classifications and material/product flow data at a transactional level. Our reviews have extended to sourcing of raw materials, movements of intermediates between locations and the supply of finished products into destination markets.The use of data analytics has helped with duty modelling, savings identification and duty optimization by looking critically at key customs duty drivers.
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Helping our clients gain insight and control of indirect taxes
How we can help Indirect tax data analytics
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We have helped a number of our clients, with a number of different big data drivers, to utilise indirect tax technology to deliver insight in relation to their indirect tax reporting and compliance position.
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Global Director Indirect Tax
Indirect tax data analytics
Gijsbert Bulk + 31 88 407 11 75 [email protected]
Americas Europe, Middle East, India and Africa (EMEIA)
Asia-Pacific Global Trade
Americas Asia-PacificEurope, Middle East, India and Africa (EMEIA)
Jeffrey N. Saviano + 1 212 773 0780 [email protected]
Kevin MacAuley +44 207 951 5728 [email protected]
Robert Smith + 86 21 2228 2328 [email protected]
William M. Methenitis + 1 214 969 8585 [email protected]
Neil Byrne + 353 1 221 2370 [email protected]
Karen Christie + 1 212 773 5552 [email protected]
Faranak Naghavi +1 202 327 8033 [email protected]
Anne Freden + 1 415 894 8732 [email protected]
Gwenaelle Bernier + 33 2 5117 5031 gwenaelle.bernier@ ey-avocats.com
Charles Brayne + 44 207 951 6337 [email protected]
Folkert Gaarlandt + 27 1 1772 5220 [email protected]
Colm Halpin + 353 1 2212 377 [email protected]
Adrian Hextall + 44 207 951 1642 [email protected]
John Sloot + 31 88 40 70426 [email protected]
Aaron Bromley + 60 3 7495 8314 [email protected]
Marc Bunch + 61 2 9248 5553 [email protected]
Andrew Cavenor + 61 2 8295 6243 [email protected]
Mark Tafft + 61 2 8295 6987 [email protected]
Indirect tax data analytics
Contacts
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EY | Assurance | Tax | Transactions | Advisory
About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
About EY’s Indirect Tax servicesIndirect taxes, ranging from VAT and customs duties to environmental levies, affect the supply chain and the financial system. They pose unique challenges to multi-national tax functions, since they must be managed accurately and in real time. These often invisible taxes can have significant impacts — on cash flow, absolute costs and risk exposures.
Thanks to our network of dedicated Indirect Tax professionals, who share knowledge and ideas, we can provide a seamless, consistent service throughout the world and deal effectively with cross-border issues. These include advising on the VAT treatment of new and complex transactions and supplies and helping resolve classification or other disputes and issues with the authorities. We provide assistance in identifying risk areas and sustainable planning opportunities for indirect taxes throughout the tax lifecycle. We provide you with effective processes to help improve your day-to-day reporting for indirect tax, reducing attribution errors, reducing costs and ensuring indirect taxes are handled correctly.
We can support full or partial VAT compliance outsourcing, help identify the right partial exemption method and review accounting systems. Our customs and international trade team help you manage customs declarations, audit and review product classifications and evaluate import/export documentation. Our globally integrated teams give you the perspective and support you need to manage indirect taxes effectively.
Ernst & Young LLPThe UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC300001 and is a member firm of Ernst & Young Global Limited.
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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made.
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