Tax transformation consistently overlooked despite increased focus on automation - Deloitte Malaysia

KUALA LUMPUR: Tax transformation has been consistently overlooked despite increased focus on transformation and automation taking place across the financial services industry, said Deloitte Malaysia.

The tax consultancy firm noted that in recent years transformation and automation have become a trending topic in Malaysia with more discussions of these issues taking place across the industry, and further amplified with the advent of the pandemic and remote working.

"Despite increased focus, one area that we noticed being consistently overlooked is that of tax transformation. At best, tax transformation is considered a secondary or minor part of a wider finance transformation or at worst, more of an afterthought,” it said in a statement today.

There is a heavy reliance on manual processes, data-crunching, and reconciliation to prepare tax-relevant information while the investment in technology towards automating such processes is also virtually non-existent, it said, noting that the tax function also has traditionally been viewed as a consumer of data from business and finance systems.

"As such, engagement in transformation projects have often happened in the beginning or at the end.

"However, this fails to consider the possibility of tax requirements evolving through the course of a transformation. Without engagement throughout the entire process, the end product fails to address the specific needs for tax reporting,” it added.

Deloitte Malaysia highlighted that the lack of investment and focus in this area could in a way, be linked to how tax has been viewed over the years, which is more of a cost and something that is not really an issue until it becomes an issue.

Unfortunately, this traditional view of tax is no longer applicable in today’s environment as the industry has evolved and is now far more sophisticated with a complex array of products and services to meet customer demand and increase profitability, it said.

In addition to shifting revenue models, there has been a greater push to increase efficiencies through driving costs down, it said, noting that tax has a crucial impact on the balance sheet, income statement, and cash flow statement and one that has the potential to not only support but add value to the broader aims of the industry.

The firm reckons that an effective tax transformation through better planning, enhanced visibility, and risk management, and improved return on capital, benefits not just the tax function, but finance and business as a whole.

"In short, the current environment needs the tax function to play the role of a strategic business partner.

"To become a strategic business partner, two tax transformation agents are needed, a tax technologist and a tax solution architecture plan. These two agents will help tax drive the tax transformation business plan and the budget to become a strategic business partner,” it said.

Deloitte Malaysia argues that tax transformation is not just new software, but the reengineering of an entire process whereby it is a change for people as well as the processes and data needed to support them, much of which may need to be examined in detail and rethought or reordered.

In the most effective tax transformations, there should be a simplification of the number of workbooks or tabs used, it advised.

"Tax is the last piece in the process of closing the general ledger to produce the financial statements, and efficiency should be a leading driver in its transformation.

"If the provision can be completed in a week, why should it take nine months to complete the related tax returns?” the tax consultancy firm asked.

With the proper use of technology, that is a question that may never arise again and as the technology becomes cheaper and less complex to adopt and operate, those involved in taxation must take this opportunity and realise their role as a strategic business partner, it added. - Bernama
Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!


Next In Business News

Going gets tough for Malaysia ahead of 2023
Asia’s inflation still moderate
Steady residential sector
Bermaz rides on buoyant car sales
Headline inflation for August hits 4.7% year-on-year
Steel makers fear deepening crisis
Prospects for Covid-19 vaccine companies diminish
Short position: Glove makers, MREITs
No intervention likely to actively boost ringgit
Islamic fintech growing fast in the country

Others Also Read