Alder & Sound: Tax goes digital - Hannu-Tapani Leppänen
International tax services are gradually moving towards digitalisation, but businesses also need digital solutions more than ever to deal with stringent transparency requirements. Hannu-Tapani Leppänen, managing partner and head of transfer pricing services at Alder & Sound, has tips and insight.
Individuals have been filing their taxes online now for several years, but for businesses - particularly multinational enterprises (MNEs) - a digital taxation future is significantly further away. At the same time as global tax regulations are tightening on multinationals, digital filing services are working their way slowly through development, but technology alone will not be enough to make this an effective system.
Hannu-Tapani Leppänen is a managing partner and head of transfer pricing services at Alder & Sound, an award-winning Helsinki-based law firm. His perspective on digital tax transformation is that it has plenty of potential, but it also still has a long way to go.
At this point, a comprehensive digital tax platform has yet to be developed. Governments around the world have tax service digitalisation on their to-do lists, but many are held back by the sheer number of pre-existing systems that must be accounted for in order for international governments and multinationals to meet legal and technical standards, as well as the volume of data that needs to be analysed.
"Multinationals have 30 or 40 different systems for legal and technical standards, and, at the same time, especially with international tax, have to transform all the data into the same format to report it," Leppänen explains. "That's the first step; the transformation of data. And then we have to add some analytical tools in order to make the data useful."
Under the microscope
Analysis of a company's tax data can pave the way towards optimising supply chains and financial processes, as well as structuring an efficient and transparent tax strategy.
Recent developments in international corporate taxation such as the OECD's BEPS project are putting added pressure on businesses, and a standardised alternative to manual filing is badly needed. "The OECD has posted some new stringent tax transparency requirements. Multinational companies now have to disclose very detailed global financial information like transaction and value-chain data," says Leppänen. "The requirements are impossible to meet by traditional manual methods."
This fast-changing environment could be the strongest reason behind the full development of tax service digitalisation. "Disruptive is the key word: strong disruptive forces are driving the change," he says. "It might sound like a cliché that the global tax legal environment is changing faster than ever before, but it's very true these days."
For an MNE to use digitalisation to its full advantage, Leppänen's biggest tip is to be prepared. "Multinationals should start now with their tax architecture. They should have one form of data, sound analytics, real-time control and, finally, automated reporting," he says.
Digital tax services also have the potential to offer greater transparency and real-time control for businesses and tax regulators. "Real-time control is the second disruptive force," says Leppänen. "It is something that European, US and Asian tax authorities have on their agenda: to have total visibility of companies' international tax matters in order to make monitoring more efficient."
Ideally, a digital tax platform would combine what Leppänen lists as "people, process and technology" into a comprehensive, self-service business intelligence system with a user-friendly interface. Instead of relying on specialised IT skills, he says, "everybody should be able to get the right data, and have dashboards and tools to allow them to make the right decisions based on the data. The future will be multilingual professionals and cross-disciplinary experts who speak the languages of legal, tax and finance as well as IT, and understand the business case behind it."
For the moment, the company is focused on preparing for that platform to finally arrive. "We are pioneers in digitalisation," says Leppänen. "We have solutions that cover specific steps of the digitalisation process all the way from data collation to analytics and presentation, reporting and communication. A digital tax platform would be a huge opportunity for us and we look forward to advances in technological tools to start capitalising on it." Alder & Sound, born in the digital age, is well-placed to assist clients with a smooth transition.