Artificial Intelligence in the world of tax
Tax technology is the new normal in enabling the business process, improving efficiencies in the integrity of critical data sets and acting as a safety net during business interruption. Increasing the integrity of data ensures that it can be used for diagnostic reviews and to provide definitive tax solutions for businesses.
Tax compliance? Software can enable the tax function through robotic process applications (RPAs). Business risk management and control frameworks can therefore be automated to collate real-time information to provide businesses and tax reviewers with dashboards of reliable information.
For tax practitioners, capacity and resource planning is a critical aspect in the tax life cycle. Prescribed timelines provided for in the Tax Administration Act must be adhered to. Pegging key milestones based on the alternative dispute resolution process can help the tax practitioner to act within the prescribed timelines and for the taxpayer to keep abreast of the developments in the dispute resolution process.
Volume submissions, including bottlenecked deadlines, can include provisional tax filing, employer tax declarations and Vat submissions due simultaneously – with RPAs ensuring accurate transfer of data and extrapolation for specific disclosures, with minimal manual intervention.
Through customised automation and interface of an organisation’s enterprise resource planning (ERP), the submission of tax and related declaration information, and the ultimate upload onto the Sars easyFile platform, should be less of the focus. Time is well spent when resources are in a position to free their time to focus on more risk management aspects (such as whether specific fringe benefits are being included in remuneration, subject to employees’ tax withholding).
AI for global mobility
Globally mobile employees require specific tax reporting and disclosure in multiple jurisdictions. Lack of tracking of travel associated with physical presence in a jurisdiction can create tax risks for the business. For example, creation of potential permanent establishment risks for corporate income tax purposes can be triggered by the physical presence of an employee in a specific jurisdiction. Building AI to inform the physical presence of an employee can trigger specific red flags for business through an automated process, thereby assisting businesses to reduce potential tax risk.
Gathering of information is a time consuming process for a person who is a tax resident of one country and non-resident in another where they physically render a service. Different tax treatment in the resident and non-resident locations present opportunities for the taxpayer to claim certain tax relief, such as overseas work days as non-sourced income. Data from a single data entry perspective can help business to mitigate tax risks and enables the employee to remain tax compliant in the locations in which work is performed, thereby reducing reputational risk for new start-up businesses in foreign locations.
Is AI necessary, and what could go wrong?
Non-compliance includes the non-rendition of a return or not submitting specific information as required in the form and manner required by Sars. Lack of accurate data, coupled with gearing toward submission deadline, can lead to inaccurate submissions being made to Sars, in which case the risk of audit is high and underpayment of tax is subject to specific penalties. Having clearly defined automated processes, attaching to specific timelines and deliverables assists in on-time submission of documentation or responses to Sars.
Automating the tax return life cycle, including the dispute resolution processes, can significantly enhance the service offering for most tax practitioners. Although RPAs operate as enablers within the tax function, artificial intelligence cannot replace the tax technical and advisory in its entirety. Typical process flows to enable the compliance function should therefore be automated and pegged with specific milestones. Automating processes to reduce manual intervention and error is critical in providing a value added service offering.
Death by automation
Methodology is important in order to understand the objectives for RPAs and other automated processes.
* Automation for data sets, mining of data: Data analytics plays a vital role in enhancing the quality of the data extracted in order for accurate advice and estimations of tax liability to be provided. Analysing data sets can be used for the different tax disciplines; for example, data extracted can be used for various transactional tax reviews, such as employees’ tax (PAYE) and Vat.
* Automation for tax technical: Tax advisory as a specialist tax function makes use of specific facts and circumstances to present possible tax outcomes. Infinite permutations and ‘what if’ scenarios can present significant challenges for the tax practitioner and should be cautioned. Reliance on automated tax opinions and solutions should be cautioned given that specific carve-outs (indemnities/disclaimers attaching to use of the software) may result in the taxpayer not having recourse at a later stage.
Automating an arrangement of principles to achieve a tax technical outcome can be achieved by automating the process elements used to provide definitive results, advice and recommendations. However, manual intervention based on tax technical is applied on a case by case basis.
AI following the shift
Recent legislative changes are making reporting a key requirement for multi-jurisdictional entities. The Country by Country Reporting Standards legislation mandates the form and manner in which multi-jurisdictional entities are required to report in terms of the headquarter reporting regime. RPA can enable the compliance requirement to ensure the integrity of the data that gets extracted, allowing sufficient time for resources to focus on the critical aspects linked to the technicalities of such reporting.
The devil is in the detail. Having a trusted RPA with a reliable method for reporting and disclosure can make the world of tax a little more certain!
Shohana Mohan is head of global employment expatriate tax advisory and Africa payroll at TaxAuditor Solutions.