Tax Automation: Hopes, fears and aspirations
It’s never been more exciting to be in the tax sector. Transformation is happening on all fronts, from the digitalisation of taxes to the changing role of the tax professional and the relationship between client and advisor. Under MTD, we can expect to see sweeping changes so how will it impact the business and the tax team and will it usher in a new era of automation? In a survey of the market, conducted in conjunction with Accountancy Age in April 2019, we sought to determine current views on MTD and automation within the accounting sector. The results provide a fascinating glimpse into how professionals are embracing the new legislation, their concerns, and their hopes for the future.
In this second blog post, we look specifically at automation and what the future holds.
Firstly, what do we mean by automation?
Within the context of tax, we are defining automation as “the delivery of an end-to-end compliance process, from data collection and management through to the generation of regulatory computations, culminating in compliance and electronic reporting”. This encompasses all the facets of tax compliance, from source to submission, to the extent that human involvement will only be required at the end of the process, where the tax team can add value through tax planning activities. Many organisations already partly automate their processes, such as for corporation tax, but MTD is creating a minimum bar of compliance that is likely to spur the adoption of automation.
When will automation happen?
Our survey found that 75% expect the business to deploy tax technology to automate processes beyond MTD and 72% of respondents believe they will have to automate their tax processes by 2024. How this will be achieved was an area people were less certain on. Just over half thought we can expect to see the emergence of regulatory compliance platforms that integrate with existing ERP and accountancy systems, although this figure may be a little low due to a lack of awareness over just what a compliance platform is. (A compliance platform has tax legislation embedded in its software and is constantly updated with regulations relating to the relevant requirements. It should be able to deal with large volumes of records, sorting them into data types, providing automatic validation and error checks and producing returns.)
The end of spreadsheets?
Not quite! Only 16% could conceive of a future without the humble spreadsheet even though this is contradicted by what is set to happen in the future. We can expect to see spreadsheet use continue for the short term but the move from manual to digital input is expected to see their use decline over time. This could be beneficial as research suggests up to 88% contain mistakes. The desire to reduce errors and free up human resource were both cited as the key drivers of automation by 85% of those questioned.
Value add or replacement by machines?
As automation gathers momentum, there’s little doubt it will have a significant impact and could fundamentally change the way tax professionals work day to day. With less time devoted to mundane data collection, 68% were able to envisage a future where staff time was freed up for more productive activities including data analysis and tax planning.
The flip side of this is that some were concerned they would need to upskill, with 35% believing automation could create a skills gap, while a quarter thought they may be replaced by machines and 18% that they may longer enjoy their job. This apprehension can probably be put down to fear of the unknown as tax professionals struggle to visualise what automation will mean for them in the future.
Looking further ahead to the next ten years, 42% believe automation will lead to the creation of data pools, from which information can be automatically extracted and used for a much wider range of computations and business analysis, while 44% foresee a time when automation will facilitate electronic audits. Moreover, 36% agreed that machine learning would be a key driver, helping to refine processes and provide tax professionals with the necessary data or alert them to obligations. We’re already seeing this emerge today with MTD solutions such as AlphaVAT able to provide deadline notifications and alerts.
Things that surprised us
The survey held some surprises too. For instance, 72% thought they would need to learn a raft of new technical skills, 50% believed they’d need to brush up on their data analysis skills and 23% thought they’d need become computer coders! Only 23 percent thought no extra skills would be required and that the technology would be self-sufficient. The good news is that even now basic VAT bridging solution portals can be highly intuitive, featuring user friendly dashboards which provide the necessary data while compliance engines perform the complex data extraction and apply the compliance requirements automatically, obviating the need for any coding experience.
Automation can and should make life easier but it will also be essential to the success of the business. Implementing technology was seen as key to attracting a tech-savvy generation and to retaining talent in the tax team by 62%. But staff also need to be given the necessary support to familiarise themselves with this technology. Of those questioned, 86% recognised this fact, saying they wanted to be able to call on the vendor to help them use MTD technology confidently.
Perhaps the main takeaway is that automation is inevitable and is coming. However, it need not be as disruptive as some of our audience feared. Yes, MTD and then the broader trend to automation will see some changes but off the back of this we can expect to see the efficiency and productivity of the tax function increase. There’s the potential for the job of the tax professional to change for the better, with less time spent on mundane activities like data collection and querying.
Right now, it seems incredible to think spreadsheets could be supplanted by compliance software platforms or that data can be amassed from internal and external sources automatically or that machine learning will see these systems flag obligations and query issues. But it’s a vision of the future that is already becoming a reality thanks to automation.