Importance Of Tax Technology In GCC VAT Landscape

Importance Of Tax Technology In GCC VAT Landscape

When one talks about technology, one always remembers the movie named ‘Extinction’ which depicts the fear of human beings for technology. The movie is about workers (look alike of human beings) developed through artificial intelligence (‘AI’), how human race on the earth goes extinct due to AI based population and eventually how human beings take over earth by destroying AI workers. While the movie is fictional, it can be the best way to express why most people are afraid to implement any machine based / technology-oriented product. The question which remains unanswered is whether AI / technology is invented to help us or to replace us?

Similar to any other invention, use of technology is also subjective and based on the person intended to use it. Technology is meant for easing out the complex functions which otherwise are carried out by human beings. While it is possible to conduct entire work manually, the need to do so diminishes when you have technology to take care of clerical and most complex situations. With the released bandwidth, human brain can focus on strategic and goal / action-based tasks which technology may not be able to do with its own intelligence unless programmed.

One of the most complex environments in any organisation is the tax function. With the world getting more connected (including passing of tax information cross-country through economic substance regulations, OECD guidelines etc.) and scope of domestic taxes being interdependent, it becomes very crucial to capture the correct and complete information in the tax web to ensure accurate financial and tax reporting. Several countries globally are on the advanced stage of tax systems technologically such as UK (through MTD), India (GST platform), EU nations (through e-invoicing) etc.

There are certain other countries (Middle East being recent addition) which are new to the tax system and are paving their into the tax technology ecosystem. Few examples to share are – KSA which issued detailed guidelines on e-invoicing or UAE which is tech-pro since day 1 of the VAT implementation.
As GCC VAT landscape is evolving, it is pertinent to note that the same is also interconnected. GCC countries agreed to implement VAT through signing common framework agreement. There are also certain regulations which talk about Electronic Data Interchange for VAT systems across GCC nations. With such broad technology based perspective, it becomes crucial to implement a tax tool in an organization especially with pan GCC presence.

How Can Tax Technology Help In GCC VAT?

  • Electronic generation of sales invoices as per the VAT requirements. This will reduce the chances of human errors while filling the mandatorily required fields.
  • Storing of sales and purchase invoices on cloud-based data rooms which can be retrieved for any given number of years, thereby saving on the physical storage cost, print cost and time and effort required for manual retrieving. This will also ensure that details can be submitted to the tax authorities within the stringent timelines during the departmental audits (which is 5 working days under GCC VAT). The positive ecological footprint is another advantage resulting from less use of paper.
  • Generation of tax reports in the formats required by tax authorities – these can be customised to develop business specific reports which can be used for both VAT compliances and management reporting.
  • Matching of VAT reports with the books of accounts thereby highlighting reconciliation differences – revenue and expense reconciliation is one of the most cumbersome activity especially in complex business environment.
  • Being connected with the official tax websites of the respective countries and updating on any new announcement / notifications / clarifications.
  • Preparation of VAT return after all the tax data checks, reconciliations and resolution of queries. These stages of VAT return preparation can be flagged in the system and unless all the steps are completed, VAT return generation would not be possible.
  • Verification intra-GCC transfers, inter-store transfers, inter-divisional transfers, intra-VAT group supplies. This will ensure complete and correct reporting across GCC organizations and within / outside VAT groups if any division / store is not within the same VAT group.

While this and much more can be strived to achieve through the tax tool, it is equally important to build awareness among the GCC corporations for such tech technology and how it can help them ease out their complex tax function. This can be achieved through regular social media highlights, tax technology-based publications, tax awareness sessions / webcasts which will not only make the tax tool strong technologically but also technically.

The team working on a tax tool also needs to be technically updated periodically so that any new requirement / variation can be incorporated in the tool on real time basis (may not be in fraction of second but at least over few weeks). With ever evolving tax landscapes like GCC VAT, such regular updating of the tax tool becomes one of the USPs for complex business environments.  The three key advantages of Tax-Technology in modern day world are:

  1. Increased Transparency for corporates involving Tax Function;
  2. Encouraging the human resources to focus on non-routine & non-monotonous work, leaving the mundane or repetitive jobs for technology;
  3. Real-Time readiness of required information and details for purpose of record keeping and audit / assessment by the authorities

In our ongoing series of Tax-technology blogs for GCC – we shall cover similar interesting and educative topics. So, stay tuned and keep looking for this space for more such thought leadership from the desks of Cygnet Team!!

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