We recently met with Andrew Bohnet, Director of Innovate Tax. We discussed SAF-T, upgrading ERPs for VAT automation, and his favourite piece of non-tax technology.......
There are new reporting obligations sweeping across Europe in the form of SAF-T which is the abbreviation for Standard Audit File for Tax and the guidelines for which were introduced by the OECD. First Portugal in December 2008, and now many more countries have adopted it including Poland, Austria, Luxembourg, France and Norway from January 2017. Other countries have adopted similar reporting formats like the Malaysian GAF report. But is your company ready, and more importantly are your ERP / tax systems and processes ready?
We were fortunate to meet up with Andrew Bohnet this month to discuss this hot topic, and find out more about his Tax Automation consultancy Innovate Tax.
SG - Please briefly tell us about your consultancy Innovate Tax
AB - Innovate Tax specialises on tax automation and bridges the gap between your Oracle ERP and Tax technology. For each business we work with, we understand that their requirements are unique but we also understand that Tax is Tax so everyone comes under the same tax law. With this in mind we have developed what we call our 80/20 solution where we bring 80% of the solution with us allowing us more quality time to really understand the nuances (20%) of each customer . In reality, this split depends on the client as in one case, 99.96% of the tax logic as right out of the box so to speak but with another, about 40% of the logic was customer specific. We translate complex tax rules into user-friendly and fully automated tax solutions so that the end users entering the transactions never have the responsibility of choosing a tax rate and all the tax logic is managed by the tax team. The complexity of the solution is in effect hidden and made simple for users, we even have inbuilt logic to prevent users entering the wrong tax rate in the first place. Perfect for the increasing number of Shared Service Centre (SCC) implementations we are taking on. We do all this on a Fixed price, Fixed time basis because we have developed innovative tools which allow us to bring you that time saving 80% of tax logic. In one particular project example, we saved 98% over manual configuration using our eBTax Rapid Install tool™.
We feel we are in a position to provide the best end-to-end automated global tax solution on an Oracle platform. Our solution is quite unique in the market, and provides our customers with detailed information and data about how they are using the solution, and their effective use of the ERP. We can then advise the customer on how to improve their processes and best practice of the product. This is achieved with our real time tax compliance tool. Instead of your traditional tax compliance tool being run on historical data after the month end close, our solution will check a transaction within seconds of it being entered so the tax team know of a potential issue before an invoice has been paid or even validated! This is a game changer in how tax will be processed and very much in line with the new real time reporting requriements we are starting to see globally.
We are a team of 15 now, and we have very experienced Oracle implementers. Clients come to us because of our deep specialisation in Oracle and eBTax.
We are based in the UK, although our geographical reach on projects is global, including China, the EU, Africa and the US. We've recently begun hiring in Bulgari to expand our development and support teams, and we should have a US office setup within 6 months too.
SG - What led you to move into this specialist crossover area between Oracle and Indirect Tax?
AB - I had worked as a contractor for a several years on Oracle Financial implementations, and had become a solution architect. When the eBTax module was first released under Oracle Release 12, I got myself onto a project in 2007 to roll it out to a client. I was determined to see it in action and understand its capability. As with all new releases, there were a lot of bugs, and during the process of resolving those bugs enabled me to understand in detail how the module worked. I was also able to recommend a number of changes back to Oracle which they took on board. At that point I realised this was a good product for me to work on.
There are many who can set up a tax rate and a tax rule but very few can set up an autonomous global tax solution. I soon realised there would be a gap in the market, and set up my business eBiz Answers which we have subsequently rebranded to Innovate Tax.
SG - How can organisations benefit from engaging with Innovate Tax?
AB - I would like to say first of all that by engaging with Innovate Tax, you are going to get honest expert advice. We will outline your options and recommend what is best for you, not what is best for our profit margin. If that means we don't get the work, then so be it, our reputation comes first. In the majority of cases, the in-house Oracle eBTax module will be the optimal tax solution for you but if a 3rd party tax engine is a better fit, we will tell you and then help you choose the tax vendor that is best placed to fulfil your needs. By using our solution and services, organisations will have a focus on one end-to-end solution for tax automation within Oracle, including the comfort of having their solution fully maintained and supported after they have gone live.
Organisations need standardised processes for tax, and our solution provides that on a global scale. We're true consultants at heart, and we love the challenge where complexity around certain transactions, specific to a business, are found. Our solution can track which users have made manual change (e.g. tax code, zero ratings etc), created potential issues, by way of our real time compliance and full audit trail capabilities. This helps us to futureproof this important business function for our clients.
SG - What advice would you give to organisations that need to upgrade their VAT automation systems?
AB - Get the right advice, and choose from a multiple of sources for that advice before taking action. What we find is that companies don't know what's possible. They could get advice from one supplier that deems a certain project impossible based on the clients' requirements, or that it is too complex. For the same client, we could find that our solution fits to exactly what they need. All too often we see companies only reaching to the established 3rd party tax engines on the market without even considering a better and far more cost effective in house tax solution.
There is quite a big price to pay for doing nothing. In about 95% of cases, we find that a client's indirect tax systems are relying heavily on manual intervention and often non compliant when we first review them. This leads to a huge number of tax issues, most of which are never picked up, putting the client at risk from a TAX audit and often leaving money on the table unrecovered. Also, companies that don't upgrade or properly automate their taxes will find that they won't be able to keep up with the demands of data that is asked for from tax authorities with the new SAF-T style of reporting demands.
SG - What are the biggest trends currently in the VAT / Indirect Tax arena that companies need to be aware of?
AB - I think the biggest development currently is SAF-T (Standard Audit File for Tax) that has been introduced now in a number of European countries. There is an increasing trend of tax authorities developing their own tax technology for e-filing of returns in a quicker time-frame, and for collecting additional transaction data.
Other examples of new reporting requirements are the Spanish SII report, which is a form of real-time reporting, or the Hungarian live invoice reporting, similar to what we have seen introduced in Brazil. Being introduced in July 2017, companies have to submit electronically to the Spanish tax authorities data from all AP and AR invoices every 4 days. Correct, resilient tax calculation at source is fundamental to reporting accurately.
HMRC and tax authorities have been used to receiving VAT returns at the end of a period with significant manual adjustments to the VAT figures before they have been entered in the returns, adjustments which can hide transactional information. What they are trying to achieve are tax returns that are being automatically populated from the company ERP systems, providing transparancy that they can reconcile to the transaction data. In the future we will most likely see the end to your VAT return because the authorities have all the raw data they need to create it themselves.
SG - How have you seen technology for VAT / indirect taxes change in the last 10 years?
AB - To be honest, I've not seen a lot of change in technology adopted by companies within the last 10 years. I've seen increased use of tax engines, with Oracle being the only provider with a fully in-built tax engine.
The main trend, as previously mentioned, is the adoption of tax technology by tax authorities and their demands on tax data being reported more directly. Its only the adoption of new technology by the tax authorities that cause disruption to the status quo that will really get companies to start looking at their tax solutions. Without this, most companies just see VAT or other indirect taxes as a pass through cost without realising the real cost of entering, processing, reporting and recovering VAT.
SG - What new developments do you envisage within the next 5 years on the evolvement of VAT technology and automation?
AB - I expect to see more SAF-T type reporting, and more real-time reporting of transactions and invoices. I also expect to see more mechanisms put in place to avoid cross-border fraud, for example insisting that companies register in a country that they are selling into.
We are generally seeing more cloud technology, which should make tax automation and reporting more readily available. There is also a potential major security issue with the cloud, particularly the risk of someone hacking into SAF-T information, which provides lots of very sensitive transactional data - the company is not the only one responsible for the security of the data uploads, the tax authorities are too.
SG - What type of people backgrounds do you recruit into your team at Innovate Tax?
AB - Basically, I look for hardworking people that have the best work ethic. I recently hired a graduate, mostly as I was impressed with his commitment to a previous low paid manual job that he had and he has truly been amazing for us.
In terms of growing our team, we've been more recently looking for people with the application knowledge / experience that would fit with our product. This has been very difficult to find and I've traditionally hired people that I've worked with on projects in the past.
Going forward, I envisage that we would look for people with more hybrid tax and technology experience, so we can provide more tax data analytics services for clients.
We are also expanding into the Eastern European and US markets.
SG - What advice would you give to someone (IT or VAT professional) looking to move their career into VAT technology?
AB - You will need to be very forward thinking and have a good knowledge of technologies. You will need to know of reporting requirements, understand the tax content and then work it back into the system requirements to be able to deliver that data in reports. There are a lot of good webinars out there to educate you on future system requirements.
SG - Outside of Indirect Tax solutions, what's your favourite piece of technology or gadget?
AB - Lego! I work very long hours during the week, so to be able to play with Lego with my 2 children at the weekend, and see them create things, is fantastic.
For more information on Innovate Tax, or to get in touch with them, please see their website www.innovatetax.com