Finance leaders can take advantage of emerging technologies like machine learning and artificial intelligence (AI)
Businesses risk losing up to 54% of eligible tax returns owing to lack of expertise and experience in the tax landscape, according to research conducted by SAP Concur. This results in a significant loss for businesses operating in multiple countries that are obligated to collect and pay Value Added Tax (VAT) or Goods and Services Tax (GST) for their respective operations.
“Lack of reclaim experience can lead to significant tax risks for businesses in the long-term; in particular, businesses risk factors such as double taxation, unintended non-taxation and steep penalties for non-compliance. This often leads to financial and compliance issues for companies that can be avoided with the appropriate resources and expertise in place,” commented João Carvalho, Managing Director, SAP Concur, Southern Europe, Middle East, and Africa.
“Multinational businesses with complex tax processes can harness the power of tech to stay ahead of compliance issues down the line, which will ultimately save organisations time and money,” he added. “When facing the challenge of both reclaiming taxations effectively and ensuring compliance, finance leaders can take advantage of emerging technologies like machine learning and artificial intelligence (AI),” he continued.
To assist, Carvalho outlines four ways intelligent technology is enabling companies to maximise tax returns:
Knowledge is power- reclaiming from tax systems with ease: VAT is the prevalent tax system in more than 85% of countries but remains highly complex for reclaims. Many countries allow VAT reclaims and have procedures for claiming refunds, but international businesses may be unfamiliar with the pathways of how to claim. When claiming VAT, it is crucial to ensure that organisations have adequate skills and are familiar with tax claiming processes.
Companies with significant cross-border transactions, high-value purchases, or large-scale investments often suffer the most from not reclaiming taxes. Often unknowingly, financial leaders overlook varying VAT rates on expense submissions, leading to unsubmitted eligible transactions and a missed opportunity to optimise their tax position.
It is useful to consider how elements such as digitalisation and rapidly changing rates and regulations and shifting employee spending behaviours, can act as drivers to reimagine their VAT programmes.
Upskill your teams to ensure compliance: One of the most effective ways to reclaim tax compliantly, is by harnessing the power of emerging technologies such as machine learning and AI. These technologies support finance teams with expediting and streamlining tax processes and facilitate the submission and review of tax reclaims seamlessly.
AI can accurately identify errors in VAT transactions and pinpoint areas eligible for reclaims simplifying and accelerating the reclaim submission process. However, AI still relies on human guidance and input to function optimally, and human insight is needed to set goals, interpret results and make decisions based on context.
Human intervention ensures that data management is aligned with business goals and vision, while AI provides leaders with the speed, accuracy, and efficiency they need. This reduces company expenses associated with hiring external VAT suppliers for each region and supports employees in managing VAT reclaims across global landscapes.
Stay on top of shifting regulations: Constant changes in global regulations also pose a growing challenge for finance and travel managers. For example, Concur expense data shows that remote working has prompted adjustments in VAT regulations and tax deadlines. This has inadvertently exposed companies to risks as VAT and GST regulations change, and altered employee spending patterns in a distributed workforce, leading to increased domestic VAT implications for expenses such as shipments and public transportation.
To anticipate how global regulations will impact local environments is an impossible task. Businesses should focus on prioritising reliable VAT compliance solutions to effectively mitigate risks and stay ahead of shifting global regulations.
This can be done by actively monitoring regulatory updates and leveraging tax technology to automate compliance processes, track regulatory changes, and analyse the potential impact of tax regulations on their business.
With this information, businesses can develop contingency plans to mitigate future risks associated with regulatory uncertainty or changes in tax laws.
Accurately validate data: Maximising VAT recovery is important for organisations, but it is equally important to understand why a VAT transaction was disqualified. Only then will finance leaders be able to come with a solution that can help avoid these discrepancies in the future. Manual procedures are more susceptible to errors, resulting in a significant portion of employee expense submissions failing to meet VAT reclaim criteria due to data gaps or inaccuracies.
Through the implementation of intuitive digital dashboards, finance leaders drill down to transaction-level data, to further understand the errors that caused disqualification and facilitate the compliance of the reclaim. By harnessing intelligent VAT technology, businesses can also optimise their VAT data collection and management.
“Efficient VAT reclamation demands a multifaceted strategy. Leveraging modern technologies, with a human approach can empower finance leaders to comprehend tax complexities and address them proactively. Intelligent technology will be crucial in streamlining VAT data management, enhancing transparency and mitigating risks. As global regulations evolve, businesses can benefit from relying on technology to help them in optimising their bottom line,” concluded Carvalho.
