Platforms and the Cloud Help Enterprises Achieve ‘Continuous’ Tax Compliance

It’s 2024 and, yes, the year is only a few weeks old.

When it comes to tax compliance, Sovos CEO Kevin Akeroyd said as more companies do business across borders, the regulatory landscape is shifting.

The governmental demand for data is rapidly intensifying as more payments go online and as real-time payments schemes proliferate, with the FedNow® Service newly in the ranks, he said.

There are more than 19,000 tax jurisdictions across the globe. Governments are cognizant of tax shortfalls — Akeroyd said the tax gap is almost $700 billion in the United States, on its way to $1 trillion. They want to collect more money. Individual European nations see their own opportunities to improve tax collection (through VAT) in the tens and hundreds of billions of euros while stimulating economic activity.

No matter the jurisdiction, no matter the nation, Akeroyd noted that governments want their data delivered digitally, in real time, and in standardized fashion.

The recognition on the part of companies that they need to reconsider their back-office processes and reporting — and technical abilities — is prompting more discussions with companies like Sovos, which offers tax compliance software and services.

A partnership approach, with integrations and APIs leveraging the cloud, can solve some of the complexities of tax compliance, he said.

“But more than half of overall tax [software] is on-premise,” he said, as many companies have been buying software packages for decades. That leads to fragmentation, especially with larger companies.

“But now the CFOs are saying that it’s not OK to have nine non-integrated pieces of software and nine solutions providers,” he said.

Now, more than ever, tax managers and CFOs need a central repository of data and centralized systems — a migration from point solutions to systems of record via platforms that offer what Akeroyd noted is a significant advantage: continuous compliance.

“There’s one system of record right on the company’s platform for all things tax-related, whether that’s by business line, geography or even use case,” he said.

The interoperability fostered by the cloud “speaks” in real time to procurement, enterprise resource planning and other systems, he said.

The real-time insight and data delivery enable a proactive approach on the part of enterprises, so they can strategize as they grow in current markets and seek out new opportunities, he said. The silos between departments are broken down a bit so that the “sheer human workload” of tax compliance is reduced.

Make one mistake with traditional, manual processes, “and you’re spending the next several hours of the day doing cleanup rather than one’s day job,” he said.

In an age where software, content, tax rules and regulations are constantly evolving, it’s more than a challenge to keep pace.

“Entire organizations are going through pronounced and steep learning curves,” said Akeroyd.

Automaton is aided not just by the shift to the cloud, but by the emergence of advanced technologies such as artificial intelligence, which helps organize and speed the data and information that winnows its way throughout organizations, and can eliminate repetitive tasks performed by employees.

“You’re freed up to do more forward-thinking work, rather than having your hands on a keyboard 10 hours a day,” he said. “The human capital calories inside a company are going to be able to be used more strategically.”