The ATO has embraced the OECD’s concept of Justified Trust to drive unprecedented levels of regulator activity. Identification of issues and areas of risk may result in extended regulator engagement, placing further demands on an organisation’s already stretched resources. In order to avoid unnecessary engagement, tax reporting must be timely, consistent, transparent and justifiable and companies must ensure their systems, processes and technology are able to produce the required data as and when required. It’s also vital that organisations are prepared and equipped to respond to regulators appropriately too.
Many organisations outsource some or all of their tax function to their tax advisors. Whilst there can be sound business reasons for doing so, careful consideration should be given to the extent of outsourcing. In particular, companies that outsource tax functions need to appreciate the importance of maintaining control of their data and systems, noting the regulator’s propensity to identify audit focus areas based on data and trend analysis.
Controlling company data enables the company to build a repository of historical and contemporary data that effectively makes it easier to identify and address issues and anomalies in advance of the regulator and ensure you can support positions taken in the event of regulator enquiry. The earlier issues are identified, the better equipped you can be to minimise negative outcomes.
Organisations with compliance and reporting systems in place internally are more likely to benefit from the insights and analysis that will allow them to address regulator queries promptly and accurately. Key benefits of maintaining internal compliance and reporting systems include:
- The ability to provide positive assurance to regulator, board and other key stakeholders in regard to income tax paid (the major contributor to achieving Justified Trust)
- The capability to extend use to global operations and achieve a real time global view of the organisation
- The potential to incorporate complex calculations within the system/process
- The ability to manage end-to-end compliance and reporting processes in one place
- The potential to tailor systems to suit organisational needs (e.g. Wolters Kluwer is able to build a bespoke data extraction capability to facilitate use of analytics tools such as Tableau)
- Increasingly sophisticated analytics and automation that deliver deeper insights into organisations including building trend analysis reports for key disclosures such as CBC, PAYG, BAS and Tax
- The opportunity to exploit new technologies and achieve greater efficiency through use of robotics/artificial intelligence
Tony Katsigarakis, Director of Consulting at Wolters Kluwer says: ‘The ATO’s Justified Trust methodology brings even greater rigour to tax compliance. Organisations that outsource tax compliance tasks and data may struggle to gain essential insights and visibility into their organisation and address regulator queries. The ATO now has access to more information about its corporate taxpayers than ever before, so it’s easier for them to identify problem tax areas within a business. Controlling your own corporate date means you can be forewarned and therefore forearmed.’
How important do you think it is for companies to maintain control of their data? We’re keen to hear your views, so please leave a comment below.
To find out how you can arrange a review of your tax control framework contact us.