Many financial and compliance departments struggle with the increasing burden that taxation compliance places on them. International taxation is a process by which multinational organizations pay a certain percentage of their revenue, profits and assets to government agencies in the various countries that they operate in. Taxation compliance is the act of providing these government agencies with accompanying compliance documents, which have to meet certain criteria. As the requirements for these documents placed on multinational organizations by the various governments are subject to change – and often differ vastly from country to country – meeting these compliance requirements is a highly complicated process that many organizations face difficulties in meeting.
1. Base Erosion and Profit Shifting (BEPS)
A notable development in this area that illustrates why this process is so elusive is base erosion and profit shifting (BEPS). As various countries have different tax rules in place, various multinational corporations have teams of specialists working for them that seek to exploit the incongruencies between the tax rules of different countries. In doing so, these multinationals often manage to bring down the amount they pay in taxes by substantial margins. Some of them even manage to virtually avoid paying taxes.
2. The Dynamic behind the Many Changes to the Tax Codes
This is clearly undesirable or even problematic for many governments, which depend on the tax revenue from the business sector to fund their policies and governmental duties at the national level. The opposing stakes these multinational corporations have vis-à-vis the governments’ need for tax revenue brings about a dynamic where tax regulations are regularly updated to close the loopholes. These multinationals respond to this by looking for new incongruencies. This warrants further changes to the tax codes of these countries. As these changes are enacted, the multinationals start looking for new incongruencies and the cycle starts anew. A large part of multinational organizations that are merely responding to these changes in the tax rules, are driven by a need to avoid being fined for not keeping up to date with these changes in taxation compliance imposed on them by national and supranational governmental organizations. Suitable specialized software is therefore of the utmost importance for them to take control of the dynamic nature of developments in taxation compliance.
3. Tax Compliance Software
TPA Global has introduced tax technology software that helps make life easier for companies by automating international taxation and compliance. TPA Global has added to the possibilities of other ERP software by allowing for the execution of ‘what if’ simulations that help provide better insights. The focus here is a more simplified overview that helps the execution of tax compliance activities. Another area in which TPA Global excels is that workflows are more easily structured. This helps organizations achieve greater efficiency in their tax compliance operations. Data is stored in a central location and what flows out of the software can be saved in locally required formats.