Tax Process and TechnologyCurrent trends in corporate bank tax operations

Agenda

I Historical perspective• The business environment for today’s tax function 4

II Current trends• Finance transformation• Financial reporting transparency / granularity• ERP implementation / upgrade• Tax accounting software• Spreadsheet innovation• Content management• Shared services• Transfer pricing

6

III Technology & data• An integrated tax technology vision 14

Bank Tax Institute

Tax Function Trends

Internal control deficiencies have stabilized

Increasing pressure to prove controls execution

Increasing need to forecast and model scenario’s

Increasing tax audit burden (IRS, states, non US jurisdictions)

Data quality and access challenges

Ever decreasing financial close cycle time

Low level use of financial reporting systems for tax data

Well established protocol - audit committee presentation(s)

Pressure to manage cost

A decade of steadily increasing regulatory requirements Sox 404 – execution evidence

FIN 48 / IRS UTP disclosure

e-filing

FATCA

Short term business traveler

Dividend repatriation

Reportable transactions

Transfer pricing audits

Tangible property regs

Affordable Care Act

Shorter financial close cycles

Pending country by country reporting

Historical perspectiveThe business environment for today’s Tax function

Bank Tax Institute

Historical perspectiveThe business environment for today’s Tax function

Steadily increasing regulatory requirements

Convergence of these events has led many companies to focus on ways to improve the operational effectiveness of the tax function 

=  Tax functions have more work to do

=  you need to get it right, no surprises

=  you are spending more time on controversy, audit defense and tax policy

=  pressure to do more with static resources and preserve critical institutional knowledge 

Tax accounting risk tolerance remains low down

Tax jurisdictions are increasingly aggressive in pursuit of revenue

Personnel: flat headcount coupled with looming retirements and inadequate succession plans

Bank Tax Institute

Current trendsFinance transformation

Tax data sources will be disrupted1. State apportionment2. Indirect tax3. Chart of accounts4. Legal entity trial balances

Can you afford to be left behind organizational improvement?

Tax is easily forgotten

Reduce time spent collecting and reconciling data Reinvest efficiencies in:1. Addressing regulatory reporting requirements

2. Integrating an acquired company3. Model impact of new product / service or geographic expansion

4. Audit currency5. Tax policy

Risks Opportunities

Bank Tax Institute

Current trendsFinancial reporting transparency and granularity

Requests for varying consolidations, financial roll‐up’s (e.g., state unitary groups, country specific disregarding legal entity, regulated entities)

More details in support of tax computations Surfacing from:

1. Tax auditors2. Independent auditors3. Industry regulatory agencies 

Devote more people to the task (not sustainable) Improve your reporting agility by:1. Ensure controllers capture the 

requisite level of detail

2. Develop skills to self‐service reports from ERP, Essbase, SAP BW, Cognos, TM1, Oracle SmartView, Business Objects, QlikView and other BI apps

If you are experiencing … Operations oriented solutions …

Bank Tax Institute

Current trendsERP implementation and upgrade

Falling behind in areas where you have made progress:1. Preserving the legal entity 

reporting capability

2. State apportionment data capture3. Indirect tax engine integration4. Fixed asset module5. Chart of Accounts changes6. Thin ledger strategy leading to 

disruption of data sources

At a minimum ‐ don’t lose ground

Influence the COA design and business rules

Improve state apportionment data collection processes

Tax depreciation efficiencies

Leverage the ERP ecosystem for efficiency gains

Risks Opportunities

Bank Tax Institute

New entrant to the market from an ERP vendor

Implementation best practices

What can you expect from these tools?

Where are the important performance gaps?

9

Current trendsTax accounting software

Current trendsSpreadsheet innovation

Single user at any point in time creating process bottlenecks

Information / data not easily shared

Control challenges:  version, access

Key‐person dependency

Performance gaps (e.g., linked spreadsheets, linked cells, hardcoded cells)

Spreadsheets inappropriately used as data management tools

Database back‐end with Excel front end (e.g., Noetix, Vena, SmartView)

Cloud versions that permit sharing, simultaneous use

Improved data management capability (e.g., PowerPivot)

Tax software as a data mart with bi‐directional data transfer to/from Excel

MS SharePoint integration

Typical spreadsheet challenges Innovation trends

Bank Tax Institute

Current trendsContent management

The structured organization, access and distribution of knowledge documents and their associated workflow.

Typical components:

Collaboration theme:A. PortalB. DashboardC. Document managementD. Process workflow

Document management system adoption is in high gear

Integrating workflow with document management is a powerful combination

SOX controls execution evidence

Data visualization

Key issue discussion logs

Definition Trends and tools

Bank Tax Institute

Current trendsShared services

A well established trend that’s here to stay – with variations for ‘near‐shore’ and ‘on‐shore’ models

Labor arbitrage benefits eroding in first wave locations, spawning SSC presence in new countries

Turnover of SSC personnel remains a challenge

Relatively slow adoption with several notable success stories

Typical processes to migrate:

1. Sales/Use tax compliance2. Premium tax returns3. Fixed assets4. Inactive Fed/State pro‐forma returns

Concern: lost opportunity to train less experienced staff

Current state Impact on Tax function

Bank Tax Institute

Intercompany accounting executed poorly

Segmented P/L’s difficult or impossible to obtain

Global cost allocations are inefficiently managed with complex spreadsheets

Booking transfer pricing via quarter or year-end journal entries creates risk for material surprises

Spreadsheets don’t enable modeling the impact of varying TP profit split or cost allocation methods

Greater reporting transparency:a) High level of global TP auditsb) OECD BEPS initiative

Expanding resources focused on transfer pricing and the TP audits

Multi-function collaboration necessary to get it right (e.g., finance, controllers, tax, supply chain, legal)

Emerging technology solutions that go beyond TP compliance to TP management

The challenges Several trends

Current trendsOperational transfer pricing

Bank Tax Institute

FinanceData Warehouse

Process Management Technology ‐ a web based portal 

Tax technology and embedded processes

Payroll Accounting

Tax Sensitized Upstream Systems

SecuritiesSystems

Finance source systems

SEC Reporting: 10‐K, 10‐Q, Tax Footnote

Web enabled tax packages

Document Management

Workflow Management

Legal Entity Manager

Tax Provision Technology

Tax Compliance & Estimated Payment System

Tax applications

Transaction DetailTransaction Detail

Legal Entity / Trial BalLegal Entity / Trial Bal

Tax Consolidated DataTax Consolidated Data

Tax Data Mart

ForeignSourceIncome

Reporting

Foreign Tax 

Credit

FTC / FSI /Subpart F R&D Credit Reporter

State Apportionment

Transfer Pricing Manager

DTA Disallowance Calculator

Interco Transaction Manager

Library of applications to address the most data intensive, labor intensive and highest risk computations / processes

Tax analytical tool sets

Automateddata 

collectionProcesses

Extract Transform Load (ETL)

Inventory

BUS OBJECTSESSBASE / COGNOSFDM / INFORMATICA

Analytical & 

Repo

rting To

ols

Audit Ready Tax Returns – Fed and 

State

Tax returns

UTP support

Workpapers and archived data

Separate Audited Financial Statements

EquityCompensation

RegulatoryReporting

R&D systems

Tax Data ArchiveTax Data Archive

Return to Provision

ERP ‐ GL

ERP Fixed Assets

Consolidation

Process management + data management + data quality + tax analytics + integration w/ tax software“True” data source system integration with Tax Tools

Regulator Ready Approved Documents

Automate data collection, manipulation/validation

Phase I Phase II Phase III Phase IV

Data management / data quality tools

IntegrationPoint

IntegrationPoint