Domestic Tax Conference28 April 2016 | New York City

11th Annual

Enhancing and integrating technology throughout the tax life cycle

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Disclaimer

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US.

This presentation is © 2016 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of US and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party.

Views expressed in this presentation are those of the speakers and do not necessarily represent the views of Ernst & Young LLP.

This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does not provide tax advice to any taxpayer because it does not take into account any specific taxpayer’s facts and circumstances.

These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice.

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Today’s presenters

Travis FoxPartner, Ernst & Young LLP – Tax Operations and Systems

Tony FerranteSenior Manager, Ernst & Young LLP – Tax Technology and Data Analytics

Alan WilliamsonSenior Manager, Ernst & Young LLP – Content Management and Collaboration

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Agenda

► Introductions► Goals and trends► Common tax data challenges

► Operational controls, access, transparency

► Data acquisition and proactive insights

► External drivers

► Value creation through tax data► Tax data maturity models

► Content management and collaboration

► Business intelligence/data analytics

► Unified data management

► Next steps

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Tax data goals

► One version of the truth► Maintain data integrity and accuracy ► Reduce data collection and reconciliation efforts ► Eliminate manual data manipulation► Enhance reporting process and analysis► Business intelligence and emerging reporting

… common goals with different solutions

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Role of data in effective tax operations

► Tax functions are the heaviest users of enterprise data.► Tax processes and enabling technology are built based on the quality of data received

from the enterprise.► Tax technical knowledge and creativity has outpaced tax functions’ ability to support the

tax positions largely due to supporting data.► The quality and, therefore, the value delivered by tax operations is directly impacted by

the data flowing into tax processes and enabling technology.► Tax “owns” no data and has little influence over the systems and processes that

record transactions.

“Data are the life blood of decision making and the raw material for accountability.”The United Nations Secretary-General’s Independent Expert Advisory Group on Data Analytics

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Megatrends and their impact to tax operations

Globalization

Agile operating model to adapt to changing landscape

Megatrends Tax operations

Centralization and technology driving change

Shift to global tax operating models

Strong tax data management capabilities to be responsive and value driver

Business transformation

Changing requirements

Business alignment

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Tax life cycle and influences

► Alignment and visibility with business

► Alignment with risk profile

► Sustainable value

► Risk identification and management

► Easy access to audit ready documentation

► Feedback to compliance process

Tax life cycle

External influences

Enterprise

Governance

► Integration of compliance process with ERP and bolt-on solutions

► Accurate and timely reporting

► Automation tools and technology

Regulatory

Economic

Industry

Strategy

Enterprise

Governance

Internal influences

► Consistency throughout the indirect function

► Visibility and status reporting within the tax function

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Principles of data-driven organizations

► Data is treated as an asset.► Organizations that understand the value of the data treat it as a true asset. In these

organizations, data are identified and inventoried, classified, assigned value, maintained for purpose and consumed to realize the identified value.

► Data is managed centrally.► Data professionals support the enterprise by ensuring that the data is of high quality,

current, and relevant. Just as important, avoiding redundancy and even discrepancies in the data is only achieved through centralization of the data management function.

► Measurements are based on data.► The old adage of “you get what you measure” is still true. Both from the top down

and from the bottom up, when the culture measures success and makes decisions based on data, the organization will achieve the value of being more data-driven.

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System/Ops assessment

Tax data flow

Managed data/Business intelligenceGovernance/Master data management

Portal/workflowTax systems

Insource/outsource support

Workpapers

Shared Service Center/Center OfExcellence

Training

Tax operations

Charts of accounts, tax sensitization

Enterprise data warehouse Transactions

Apportionment data Legal entity remediation

Legal entity, Charts of accounts

Inter-companyTransfer pricing

Data sourcing ERP Consolidation

X – Legal entity rationalization

Summary tax data flow

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Tax department challenges

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Tax department data challenges Lack of access, control and transparency to operations

► Difficulty locating and managing final versions of critical documents

► Inadequate information-sharing across tax functions and geographic locations

► Excess time and effort spent on administration and manual tracking

► Redundant and email-intensive data collection methods

► Disparate data collection and other unstructured data

► Lack of visibility and oversight of deadlines, deliverable status and resource allocation

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Tax department data challengesIsolated data – difficult to find insights

► Tax consumes massive amounts of company data► Separated by systems and format

► Custom reporting is limited and finding insights is time intensive

Outputs OutputsOutputs Outputs

Federal State TransferPricing

Taxaccounting

Outputs Outputs

Indirect Transferpricing

Input company data

Inter-national

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Tax department data challengesTax authorities are aggressively leveraging data

GovernmentCompanies

Gather FinalizeAnalyze

Vendor invoices

Bank records

Foreign trade

Client data Government real time data analytics engine

Government requests delivered to taxpayers

► Validation of invoices and discrepancies

► Sales/purchases declaration verifications

► Payroll/withholding declaration verifications

► Comparing data across jurisdictions and taxpayers

► Tax forms► Tax assessments► Audit assessments

Invoices

Statement of accounts

Customs declarations

Direct access ofclient source data

Tran

sfor

m to

gov

ernm

ent s

tand

ard

Bus

ines

s ru

les

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q

External driver samples

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External driver sampleGovernment digital taxation

Tax authorities are going digital

Digital tax is a paradigm shift

Digital tax meansno more

“business as usual”

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Government digital taxation landscape

What: Digital taxation allows tax authorities to collect detailed data in real time► Unprecedented data availability to governments► Enables new government data testing driving eAudits► Taxpayer information is cross-referenced and possibly shared among

governments and agenciesHow: Tax authorities are building sophisticated tax data-gathering and analytics platformsWhere: Latin America: Brazil, Mexico and beyondWhy: Revenue pressures for increased collections, reduced fraud, improved tax authority performance

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Tax authoritiesThe move to digital

Level 1 Level 2

Para

digm

shi

ft

Level 3 Level 4

Dis

rupt

ive

Level 5“E-file” “E-accounting” “E-match” “E-audit” “E-assess”

Corporate entities required or have the option to use a standardized electronic form for filing tax returns. Other income data (e.g., payroll, financial) filed electronically and matched annually.

Corporate entities required to submit accounting or other source data to support filings (invoices, trial balances, etc.) in a defined electronic format at a defined frequency. Additions and changes at this level occur frequently.

Corporate entities required to submit additional accounting and source data, government accesses additional data (bank statements). Government begins to match data across tax types, potentially across taxpayers and jurisdictions in real time.

Corporate entities’ L2 data is analyzed by government entities and cross-checked to filings in real time to prevent fraud, unintended errors, and to map the geographic economic ecosystem. Governments send taxpayers electronic audit assessments with limited window to respond.

Government entities use submitted data from corporate entities to assess tax without the need for tax forms. Taxpayers have limited window of time to audit government-calculated tax.

.

Note that not all governments collect the same information or treat it the same under this model. For example, a country might be at Level 1 for certain data, but at Level 3 for other data. Further, the move to digitization is not necessarily linear, nor should higher levels of digitization be viewed as the ultimate goal of either taxpayers or tax authorities. The graphic is merely intended to provide an easy-to-digest overview of the vast spectrum of digitization efforts.

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External driver sampleAction 13: Country-by-country (CbC) reporting

► What it is: High-level information about Multinational Corporation’s (MNC) jurisdictional allocation of revenue, profit, taxes, assets and employees to be shared with all tax authorities where MNC has operations; purpose is to provide greater transparency

► Who is affected: Multinational groups with consolidated revenue of €750m or more ► When it becomes effective: Fiscal years beginning on or after 1 January 2016, with

first CbC reports to be filed, at most, one year from fiscal year-end► Where companies will have to file: Filing with tax authority in parent country, to be

shared with tax authorities in countries where group has entities or branches► How reporting will be managed: Information on revenue, profit, tax (cash and

accrued), stated capital, accumulated earnings, tangible assets and employees provided on a CbC aggregated basis

► Other considerations: CbC report needs to be consistent with master and local files

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Sample CbC reporting templateTable 1 and Table 2

Table 1:

Tax jurisdiction

RevenuesProfit (loss)

beforeincome tax

Income tax paid (on cash

basis)Current year tax accrual

Statedcapital

Accumulatedearnings

Tangible assets other than cash

and cash equivalents

Number of employees

Unrelated party

Relatedparty Total

1.2.3.4.5.

Table 2:

Tax jurisdiction

Constituent entities

resident in the tax

jurisdiction

Tax jurisdiction of organization or incorporation if

different from tax jurisdiction of

residence

Main business activity(ies)

R &

D

Hol

ding

or

man

agin

g IP

Purc

hasi

ng o

r pr

ocur

emen

t

Mfg

or

prod

uctio

n

Sale

s, m

arke

ting

or d

istr

ibut

ion

Adm

in, m

gmt,

or

supp

ort s

ervi

ces

Prov

isio

n of

se

rvic

es to

un

rela

ted

part

ies

Inte

rnal

grou

p fin

ance

Reg

ulat

ed

finan

cial

se

rvic

es

Insu

ranc

e

Hol

ding

sha

res

or o

ther

equ

ity

inst

rum

ents

Dor

man

t

Oth

er

2. Assess risks and opportunities

3. Prepare for and conduct year one reporting

4. Sustain future compliance1. Getting started

P&L, BS and cash flow or TB data from consolidation system or ERP

Local financial statements/local financial controllers

HR

Transactional details from ERP systems

Tax provisions

ERP consolidation system

Tax department/Cosec records Some groups will not have an identifiable source for business activities

Tax returns Local financial statements

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Prepare for and conduct year one reportingOptions for data gathering and technology tools

Insource/internally manage or co-source?

► Insources home country and/or global compliance

► Large and complex

► Mid-market with low complexity

Key decision point

Typical profile

► Co-sources home country and/or global compliance

► Mid-market with mid to high complexity► Limited IT support to develop an

insource solution

2. Assess risks and opportunities

3. Prepare for and conduct year one reporting

4. Sustain future compliance1. Getting started

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Value creation through tax data

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Tax value in the new era of digital taxation

► Tax is generally a high performing team in spite of limitations around data and technology, but is often constrained in its potential to define or create value.

► Tax can often deliver the largest component of the value proposition in enterprise initiatives and transformations.

► The value is primarily derived from risk mitigation (rate protection) and tax planning (enhanced opportunities); while there are efficiencies to the integration, this is often the smallest component.

► External factors, such as tax audits, are becoming far more data centric and can increase exposure if process and data is not efficient and clean.

► Effective tax technology can deliver sustainable value and efficiencies to carry tax departments into the new era of digital taxation.

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Tax value through effective data management

Operational ► Tax enabled enterprise environment► Efficiency of solutions to manage

data and process► Effectiveness of resources spent on

value-added work

Audit and compliance ► Optimized data and technology► Sustain value of current tax positions► Documentation to support audits

Strategic► Protect effective tax rate► Cash management and tax

attributes optimization► Avoid double taxation

Financial reporting ► Accuracy of tax reporting► Timeliness of tax close► SOX and regulatory compliance

Enterprisevalue from

Tax

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Tax data maturity models

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Defining tax data reporting and analytics

Data analytics often describes many different activities…

Tax big data management is scalable, supports the entire tax function and facilitates

business decisions.Load tax process software

Prepare workpapers

Review transactions

Respond to audits

Analyze accounts

Discover business trends

Monitor risks

Track tax positions

Monitor transfer pricing

Tax-influenced business decisions

Prescriptive intelligence

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Data insights – value across the tax life cycle

Transfer pricing analytics

► Analysis to ensure consistent execution of policies

► Cost plus pricing, resale price and gross margin method analysis

► Transactional analysis

Risk analysis and monitoring

► Risk analysis and heat maps► Transaction profile trend

monitoring

Transactional analytics

► AP/AR transactional analysis► Tax coding and posting error

detection► One-off or embedded solution► IDEA preparation

Targeted analytics

► Pricing and margin modelling for new indirect taxes

► Transactional keyword analysis

► Tax coding logic review

Tax reporting

► Enhancements to existing tax return spreadsheets

► Control checks and tests► Implementation of new

reporting solution

Supply chain analysis

► Supply chain mapping using transactional line level data

► Analysis of actual tax treatment against expected

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Tax department performance maturity

Content management and collaboration (CMC)

Business intelligence/data analytics

Unified data management and predictive models

Maturity

Basic Established Leading

Cap

abili

ty

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Tax performance maturity examples

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Content management and collaboration

Tax portals continue to be an integral part of an effective tax operations model. When deployed properly, portals allow Tax to gain efficiencies by mechanizing processes and centralizing document management across various tax functions. With all of the controls, processes, and procedures surrounding the entire tax life cycle, tax departments are ideal candidates for tax portals as a solution to:► Advance overall organizational efficiency► Increase information-sharing across tax functions► Manage tax documents and processes within a

secure and centralized application

Information-sharing

Centralization of tax documents and

processes

Organizational efficiency

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Standard CMC modelGlobal Tax Operations Portal (GTOP)

What is it?► Web-based portal comprised of tax process

applications developed on SharePoint to manage and streamline tax operations

What does it do?

► Provides a single platform to share information and connect cross-functional tax operations and services

► Centralized document management ► Process automation and workflow► Dash-boarding and business analytics

Common Portal Apps

► Foundation► Compliance Manager► Notice Tracker► Audit Manager► Data Collection

What are the benefits?

► Rapid deployment► Web-based access, transparency,

automation► Reduce manual processes► Enhanced operational controls

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Sample tax portal structure

Tax Technology(Centralize design, support ALL Tax

functions)

TaxTop-Level Site

IncomeTax

Transaction Tax

Archiving

- Governance Protocols- Access and security- Site maintenance and Q&A- Documentation- Training - Knowledge Transfer- Self-sufficient support

Tax Portal Enhancements Tracking

Utility

- Policies - Retention Task Tracking- Document management

Audit

- Enhanced document

management - Audit

management process & workflow - Audit &

Information Data Request

tracking- Prior year Information

Data Request search

Compliance

- Document management - Process & workflow - Metric tracking tools - Shared resources- Resource scheduling- R&D survey conversion

Fixed Assets

- Standard processes and

automation- Enhanced document

management & file sharing

Compliance

- Document management - Notice Tracking- Return, Filing, Payment & Refund automation- Resource scheduler

Audit

- Enhanced document

management & file sharing

- Audit tracking tool

- Audit project management and tracking

tools

Billing & Research

- Document management - Exemptions- WIP tracking- Policies & procedures- Planning ideas & opportunities- Certifications procedures

Global Compliance

- Global alerts and dash boards- Task tracking- Standard processes and automation- Support attachments- Key figures

InternationalTax

- Monthly cash and

withholding tax reporting

- 5471 / return package gathering- Global

provision package gathering

- Standard processes and automation - Enhanced document management & file sharing- R&D survey conversion- Notice Tracking

Property Tax

- Enhanced document

management & file sharing-

Process & workflow

- Cash taxes & budget tracking

TaxAccounting

General Top-level Functions

- Global management and shared information- Full search- Training and Templates- Resource management- Budget tracking- Dashboards and Metrics

R&P

- Published & Working

documents- Process &

workflow- Search

- Document management -

Process & workflow - Planning

opportunities

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Tax portal process samples

► Data collection – manage data collection requests centrally, create customized forms/templates, upload documents, and track progress of requests.

► Compliance management – centrally manage filing deadlines, resource management, workpapers with version controls, automated workflow approvals with audit trail.

► Audit management – web-based management and tracking of audits across all tax functions.

► Notice tracker – centralize notices (state, transaction, etc.) with support attachments and links to filings utilizing multi-level workflow and reporting metrics to reduce the clearing cycle.

► Dashboards and reporting – dashboards and reporting can give management a snapshot into the underlying data in your tax portal to let you easily see metrics around processes and data.

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Tax portal benefits

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Embedding analytics across tax services

► Analytics is not an isolated tax offering► Analytics is the method through which

all tax services will be delivered► Analytics is the future of taxGlobal

complianceand reporting

Businesstax

services

Indirect

Internationaltax

services

Peopleadvisoryservices

Transactiontax

Law

Analytics

Sect

or

Subserviceline

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Analytics and tax business intelligence

► Interactive presentations► Statistical analysis/modeling► Large datasets/advanced data integration

► Control/risk management► Efficiency and cost reduction► Tax affected business decisions► Enhanced stakeholder communication

Tax valueComponents

Visual

Data science

Big data

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Analytics and agile data management platforms

► Scalable enterprise solutions that leverage robust software products

► Agile tax data management architecture with analytics plug-ins

► Visualization and interactivity

► Tools often being deployed outside of tax

Source: Gartner (February 2016): Business intelligence and analytics platforms

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Unified data management – Advanced

► Ability to make data-driven decisions quickly across broad sets of data► Significantly reduced effort for new analytic outputs► All decision-makers have access to data and analysis► Near real-time, cross-functional analysis► All relevant data is consolidated, quality-checked and structured for

tax consumption► New technologies reduce data management effort and deliver at

high capacities► Enhance enterprise investments► Prescriptive analysis

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Unified data management – Advanced

Align Acquire Conform Store Supply

Tax data and document repository(on-premise or hosted solution)

Co/outsource/in-house solutions and processes

Managed tax service support

Tax data management Key performance indicators, overviews and collaboration

Tax processsolutions

Security, quality, controls, retention and traceability

Tax search

Process views

Provision

Global compensation

Statutory reporting

Workflow, calendar, andstatus reporting

AlignSystems of

record

Other source data

Enterprise resource

planning (ERP)Global provision and

forecastCountry-levelcompliance

Tax planningSupply chain reporting and

analysis

Tax audit management

Transaction tax engine

VAT

Sales/useTransfer pricingEffective tax rate

Cash taxForecasting

Credits and incentivesIncome taxStatutory reporting

Other TBD

Analyst benchmarks

Audit adjustments

Court cases

Acquire and

conformSupply

Social media content

Tax data analytics

Big data Store► Financial► Nonfinancial► Industry content► Benchmarks► Social media

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Tax data analytics samples

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Tax data analytics samples

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Enablers and success factors

► Look for opportunities to initiate changes, such as merger synergies, finance transformation and financial system upgrades

► Engage with your finance department – tax should be in every finance initiative going forward ► Focus on the data; clear the “noise,” so tax technical team can be more effective► Look at process and systems from an integrated perspective for all tax data: Planning, Provision,

Compliance, International, Sales and Use, Property and Audits► Understand infrastructure parameters – what tools and resources do you have available► Ensure there is commitment from executive management► Engage tax department-wide portal deployment – be the company leader and success story► Actively participate in governance to ensure consistency► Develop and utilize Tax Technology Group – becoming critical parts of large tax organizations and

are dramatically changing the way tax works

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Enablers and success factorsResource needs

“Whenever new technologies … enter the market, they present an enormous opportunity but create another skills deficit to fill.”

– Mike Merritt-HolmesCEO Big Data Partnership

Analyticsprofessionals

Auditors Tax professionals

TransactionprofessionalsConsultants

Analytics planning/coordination

Analytics innovation

Data capture Professionals with an analytics mindset

Analytics delivery Analytics consumption

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Enablers and success factorsResource needs

Com

pete

ncy

Skill

s

Analytics planning and coordinationAssist tax teams to develop analytics plans and coordinate analytics delivery

► Execute the end-to-end analytics process

► Creating initiative plans defining nature and scope of analytics

► Identifying the data needed to support the plan

► Coordinating the delivery of analytics to the department

Analytics innovation

Design and build process and specific analytics that align with organization priorities

► Understand process, methodology and objectives

► Skilled at designing and building analytic models

► Understand the flow of data through business processes on common ERP and systems

► App design and programing

Data capture

Execute the process to efficiently and cost effectively obtain data by establishing repeatable capture methods

► Experience with various techniques for extracting data from systems

► Knowledgeable on data structures in ERP systems

► Experience managing the transfer, reconciliation and validation of large data sets

Professional with analytical mindsetIntegrate analytics into the service delivery process using analytics for high quality work products and insight

► Core tax experience complemented by an understanding of the impact of analytics on each phase of the tax life cycle

► Understand the flow of data through key business processes and key systems

► Project management► Strong communication► Service delivery methodology► Analytics application

► Programming► Data management► Data visualization► Data science and statistics

► Basic accounting and finance► Data structures and big data► Business information systems► Extraction tools and

techniques

► Business information systems► Business process and

transactions flows► Business analytics

Kno

wle

dge

Analytics professional Tax professional

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Next steps

► Assess your position on the maturity model► Understand the Content Management and Collaboration and analytics landscapes

within your organization► Assign responsibility for owning CMC and analytics within Tax► Consider how analytics can support and grow your Tax function► Encourage innovation

Growth drivers► Increased awareness of benefits► New analytics tools and capabilities► Availability of data

Adoption barriers► Lack of analytics specialists with tax

background► Resistance to replace gut instinct

decision-making► Lack of best practices

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Questions/commentsFor more information about this presentation, please contact:

Tony FerranteTax Technology and Data AnalyticsAustin, TX+1 512 288 4892tony.ferrante@ey.com

Alan WilliamsonContent Management and CollaborationAustin, TX +1 512 736 8553alan.williamson@ey.com

Travis FoxTax Operations and SystemsDallas, TX +1 214 257 8404travis.fox@ey.com

Domestic Tax Conference28 April 2016 | New York City

11th Annual