- The role of corporate tax departments is changing due to increased tax complexity from technology changes and proposed tax reforms. - In an ERP environment, tax departments need a "tax technologist" to integrate the tax system with other modules, ensure tax compliance needs are met, and address complex tax processes. - A tax technologist monitors tax law changes, researches complex issues, updates tax content, and helps align the tax function with business objectives by improving processes using new technologies like tax calculation software. As technology continues to evolve rapidly, having a tax technologist is critical for tax departments to adapt and maximize their strategic value.

1. EMERGING ROLE OF TAX TECHNOLOGIST IN A ERP ENVIRONMENT BY KAMAL ADENI

2. Three things are certain in life; Death, Taxes and Technology Improvements. Anonymous

3. INTRODUCTION Technology is having a profound impact on almost every facet of corporate life. Technology impacts what business have done and how it is going to do in the future. This period is the information era, and corporations and individuals alike are demanding information and technology faster and faster. This demand for information technology is affecting every profession and business especially so the Tax Department.

4. INTRODUCTION As the information Technology continues to evolve, the new knowledge, new products are likely to increase tax complexities, driven by consumer demand and expectations. This changing technology environment is going to create various sales tax taxability issues as well as research issues. The sales tax code for the various states is stuck in the 90’s and the taxing jurisdictions are still struggling to catch up to the technology age.

5. INTRODUCTION With the raging deficits there is a lot of talk of imposing a VAT or a flat tax or some form of consumption tax to pay for the Federal as well as the State deficits. These tax changes both at the Federal level as well as at the state level in addition to the technology changes are going to change the face of the tax department.

6. Changing Face of the Tax Department The role of the corporate tax department is changing because of the increased complexity of corporate / SALT taxation resulting from both the effect of information technology on tax policy, and also the effect of information technology on the business policy. In the past, tax departments filed returns, tried to find tax savings, fought with the auditors, and advised senior management on M&A issues and on transfer pricing issues.

7. Changing face of the Tax Department The role of the tax department has thus slowly evolved, much as the way the tax code has has evolved. Initially, the tax department had the persons who filled out the tax forms, the classic compliance expert. As tax law complexity grew, compliance expertise also grew. But now the tax department is evolving further due to the changing environment forced upon it by technology.

8. Changing Face of the Tax Department Today, due to the fast changing technology, more than tax compliance expertise is required. Business continue to move into the information era, therefore it becomes imperative for the tax department to become a fully integrated as a member of the strategic team. The tax department can no longer afford a low value add department who fills out the forms. The tax department must become the essence of the information technology change. A department that understands not only its compliance function but also the business processes. It is also no longer adequate for the tax department to be a reporter of tax, the tax department must make it happen, because the information technology is driving change with which the tax department must understand and manage.

9. Changing Face of the Tax Department To mange technology change the tax department manager must develop a information-age knowledge worker, i.e. a Tax Technologist. This tax technologist is needed to stays ahead of the technology curve and keep the head of taxes appraised of the changes. Only then can the head of taxes take the steps necessary to ensure compliance with the complex domestic tax rules and regulations as well as any global tax transactions.

10. The need for the Tax Technologist To fully understand the need of the tax technologist we need to discuss this in an ERP environment. Once we understand the role of the Tax technologist in an ERP environment, we need to understand the ERP environment as it relates to sales tax.

11. ERP Environment According to Deloitte “Less than half (41%) of company tax professionals feel that their accounting systems collect adequate information for calculation and tax disclosure. A finding which might explain why only 20% believe that their systems adequately meet GAAP requirements.

12. ERP System Source: Deloitte Tax Technology Paper

13. ERP Implementation During an ERP implementation several corporations have made a mistake of not fully integrating the tax department in the process. This has resulted in GIGO data for the tax department and the tax department was unable to fully utilize the efficiencies of the ERP system.

14. ERP & SALT At this point I want to focus on sales tax calculation engine or the ERP tax engine.

15. ERP Tax Engine For tax calculations a centralized tax engine makes an efficient tax processing module . Transaction Data is stored in the Tax engine data base for future processing. If a corporation acquires new business, they can be seamlessly be added to the ERP tax module making the tax department functionality more adaptable to any new business line or reporting

16. ERP TAX ENGINE INPUTS AND OUTPUTS

17. TAX ENGINE COMPONENTS Invoices

18. Tax Reporting For audit or for compliance purpose a tax reporting function is critical to generate the appropriate tax returns and to enable electronic tax filings. Let us look at the structure around the tax reporting function.

19. Tax Reporting The tax process in an ERP environment is built around a tax calculation engine that depends on up to date tax data to accurately calculate tax on a invoice. This process help in automating the returns preparation as well. To Better understand this process we need to look at a transaction tax process.

20. Transaction Process Flow ACCTG Process ERP Source Documents Tax Engine Tax Reports Tax Process Tax Data

21. Integrating the Tax Engine with various ERP modules In SAP environment we need to integrate the billing system with the tax engine and the complexity of a enterprise’s business operation compounds the issue. In addition, the exemption certificate management needs to be factored in. For a meaningful solution the billing system, the exemption certificate system, the tax rates module, and the sales tax filing and remitting module needs to be integrated with the tax engine.

22. Where Do You Start? The questions arise where to start? Who in the tax department will be the SME? Who will act as a liaison between the ERP implementation team and the Tax department? Who will ensure that the tax department compliance needs and data needs are addressed? Who will address the tax process complexity? Enter the tax technologist: The tax technologist will be the voice of the tax department as he/she understands the technology complexity and will also be a tax expert.

23. A Whologist? In layman’s terms: A Tax Technologist is a cross between a tax nerd and a computer nerd.

24. The need for a Tax Technologist Most Tax departments currently do not have the skill set within the department to handle and resolve the tax technology issues. Nor do the various tax department have the time to handle the technology issues, let alone keep up with the technology.

25. Who is a Tax Technologist? One who monitors tax law changes in more than 12,000 taxing jurisdictions in the United States One who stays on top of the latest tax technologies One who researches complex tax topics One who Updates corporation’s tax content on a monthly basis

26. Why A Tax Technologist? A Tax Technologist focuses primarily on tax process redesign, He / She will help the employer align the tax function with business objectives. They will provide an integrated approach to process improvement that will help the tax department maximize its strategic value internally and externally

27. Why A Tax Technologist? For example in a SAP® R/3 ERP solution enables tax determination through integration decisions using third-party tax calculation software such as Vertex, Sabrix, ADP etc., using consumer use tax solutions. This enables the corporation to minimize tax decision errors and at the same time calculating use tax chargements at the time of purchase rather manually calculating and assessing use tax at a later date.

28. Why a Tax Technologist? The changing technology and the increasing role of the tax department in the ERP implementation process as well as the ability of the tax department to keep up with the changing tax needs call for a tax technologist. For example Are you ready for WEB 3.0 The Semantic Web ? In a Semantic web it will be a virtual world. Web users would eventually be able to walk into virtual buildings and stores online to make their purchases. The tax processing as we know it would have to make a radical change to keep up with this type of technology as well as taxability of items and services. Most of all it Web 3.0 will have a profound impact on the tax department. Are you ready?

29. Conclusion Ready or not, the tax technologist is at the tax department’s door. Tax Departments in their quest need to start looking for individuals not only with strong transactional tax skills but also with strong technology skills The future tax department is likely to have a tax manager with strong tax skill supported by a tax individual with strong technology skill. Ready or not the future is here.