EY Global Indirect Tax Symposium 2016

20–22 April

Data analytics

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PanelKaren ChristieUnited States

Marc BunchHong Kong

Colm HalpinIreland

John SlootNetherlands

Data analytics

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Agenda

► Introduction► Leading today,

► VAT and GST analytics► Trade data analytics

► Leading tomorrow► Questions

Data analytics

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Introduction

Data analytics

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Introduction

► In this era, multinational companies cannot afford not to seek support from tax technology.► The transactional nature of indirect taxes makes technology even more critical.► Within the different indirect taxes we are converging our data requirements and technologies, we

continually see that convergence into other taxes and beyond.► The purpose of the session is to demonstrate what is leading in data analytics today and what we see as

leading tomorrow.

Data analytics

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Leading todayEY VAT and GST data analytics

Data analytics

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VAT data analytics

An effective approach to data analytics is crucial in gaining and maintaining control of your VATfunction.► Planning ideas: process improvement and new business opportunities► Compliance: easy reporting of various VAT requirements► Accounting: easy in-house general VAT understanding and recording► Controversy issues: use of data analytics and data audit trails for VAT audit defense

Cash savingsUnclaimed VATOverpaid VAT

Wrong rate

Prior exposureUnpaid VAT

Overclaimed VATWrong rate

Process errorsIncorrect tax codesManual procedures

Supply chain improvementsVAT overview (supply chain mapping)

Cash and cash flow improvements

VAT dataanalytics

Data analytics

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VAT data analyticsTrends

► Landscape:► Increased use of data analytics to manage global VAT effectively:

► Current-state analysis - strong insights into the effectiveness of the current process► Identification of potential cash tax savings► Improvements in working capital and cash flow► Root cause analysis for errors and remediation plan► Root cause for process inefficiencies► Business case for supply chain enhancements► Improvements in business processes

► Trends:► Increased use of visualization tools► In-house development of flexible and scalable data analytics solutions

Data analytics

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VAT data analyticsEY approach

Data analytics

Indirect tax returns

Data analytics and exceptionreporting

Data drill-down

Trend analysis

Management reporting

Self-serve reporting

Automated return preparation, including summarization and mapping of data to returns,adjustments and data analysis

Automated data analysis to identify errors and anomalies through predefined or user-defined data validation and queries

Ability to drill down from summarized to transaction level data to enable detailed analysis

Visual trend analysis to monitor key indirect tax numbers (e.g., VAT throughput andirrecoverable input VAT) over time

Dashboard reporting and visual output providing visibility to global indirect tax data tofacilitate governance and management decisions

Ability to query and report using any data elements and across entities, countries andregions to support analysis and response to internal and external queries

► Functionality determinedby client requirements

► Expandable over time, toprovide a fully scalablesolution

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Demonstration

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Leading todayEY trade data analytics

Data analytics

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EY trade data analytics

► Trade effectiveness: the ability to access markets faster, better and cheaper► Trade data analytics: the process of harvesting key trade data and extracting insights and opportunities

to improve trade effectiveness

Data analytics

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EY trade data analytics

► All aspects of trade are now electronic, and richdata is available:► Internal – ERP data► External – customs and customs brokers

► 100+ projects primarily using historic customsand broker data:► Global experience - in 40+ countries► Rich - can be 80+ fields per line► Unique - combines multiple sources► Accessible external -means reduced client effort

Visualization

Testing and modeling

Normalization

Customs Broker ERP Other

External Internal

Recent developments in convergence with VAT analytics on import VAT

Data analytics

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EY trade analytics outcomes

► Faster – assessment of customs process performance and improved trade compliance to reduce supplychain intervention and help achieve AEO status

► Better – define current-state and model future-state physical and financial supply chain variables toimprove and sustain operating and tax model effectiveness

► Cheaper – direct trade cost savings:► Customs – e.g., FTA sourcing and landed cost improvements, government trade programs, bonded facility

modeling, import VAT recovery reconciliation and HS classification inconsistency► Operational trade – e.g., sourcing consolidation, supplier contract performance, transport mode and routing

analysis and sourcing, transport insurance renegotiation and customs broker service levels

Data analytics

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Typical EY trade data analytics program

Data analytics

Data analytics DashboardsSQL database

External data

Broker systems

Customs

OutcomesActions

Stakeholders

Acquire Normalize Analyze Visualize Assess Implement

Stakeholders

Monitor

ERP data

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Demonstration

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Leading tomorrowTransactional data analytics – closing the loop

Data analytics

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Leading tomorrowTrade and VAT solutions

Data analytics

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Some initial thoughtsBackground to advanced trade and VAT analytics

As more trade data becomes visible and can be analyzed and actedon, the next question is: what is the best way to translate this intobusiness value?

Key areas of trade cost andcomplexity:► Transport and logistics► Customs duties and taxes► Brokerage and trade compliance

management► VAT leakage

Business decisions areas with tradeconsideration or implications:► Direct procurement and “landed cost” based

decisions► Network redesign► Low cost sourcing and “localization”► Other supply chain changes – depots, multi-

modal supply points, pricing (TP changes),commercial terms, etc.

► Transfer pricing and adjustments

Relevance –which

stakeholders canwe bring the

most benefits to?

Vision – what will the tradedata function look like in

three years?

Direction – howdo we move fromwhere we are not

to where weneed to be in the

future?

Data analytics

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VisionKey drivers for a digitally enabled trade organization

Cost

IntegrationBusiness value

Reduce cost and unlock savings► Operate a more efficient trade cost structure

► Reduce business fatigue caused by monitoring and complianceactivities

► Automate compliance and reporting where possible

► Identify potential operational efficiencies and cost savings for trade

Integration► Align to wider digital and cross-business initiatives

► Increase and harness value of digital data for trade flows

► Increase internal and external stakeholder confidence oftrade organization and value to the business

► Deliver global consistency and quality

Business value - be a business partner, not just the “trade police”► Be more strategic in focus; help the organization achieve its business objectives

► Bring more business insight; provide subject matter expertise

► Help design the future-state global footprint

► Improve supply chain and drive costs savings

► Develop talent and future business leaders (i.e., feeder of talent to the business)

Current state Desired future-statecoverage

Data analytics

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VisionOutcome - moving up the value chain

Data analytics

The digitally enabled trade organizationMove from a compliance-focussed trade organization to a forward-looking

organization that drives real savings and differentiation

► Improve supplychain and tradeagreements

Improve

► Trade as a keybusiness partnerenabling proactivebusiness benefits

Differentiation

► Focused analysis toidentify and capturesavings and reducecosts

Identify Savings

► Profiling► Dashboards► Measure spend

and opportunity

Visibility

Compliance► Keep us out of

trouble

Done

Started

Not started

Maturity

Valu

e

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RelevanceMatching data and insights to stakeholders and business value

Managedata

Performanalytics

Drivedecisions

Deliverbenefits

To drive better outcomes, the key is to define the outcomes, ask the right business questions andthen seek answers in the data: hence the move from right to left.

Descriptive analytics

Mine past data to report, visualize, andunderstand WHAT has already happened –after the fact or in real time.

Predictive analytics

Understand the underlying relationshipbetween data inputs and outputs to understandWHY something happened and/or to predictWHAT will happen in the future across variousscenarios.

Prescriptive analytics

WHICH decision or action will produce themost effective result against a specific set ofobjectives and constraints?

ERP

Data systems

GTM systems

Broker data

Government data

Procurement team

Freight forwarders

Freight payment

Data-driventrade

organization

FCPA andreputation

M&A

Tax-tradeimprovements

Supply chainoperations

Logisticsmanagement

Complianceand BEPS

Data analytics

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Information lifecycle management

Master data, metadata and data governance

AnalyticsData acquisition

Reporting and analytics

Visualization

Advancedanalytics

Financial andoperationalreporting

Insights

Batch

Real time

Enterprise data platform/big data environment

Operational data martswith conformed dimensions

Data repository

Tools

Sandboxes

Archive

Staging Discoveryplatform

In-platformanalytics

Securityand audit

Dataintegration

Backup/DR

Dimensionalstaging

Data integration

Big data-enabling analytics

Structured data(internal and externalsources – ERP, CRM,GTM, tariff data andT&L data)

Unstructured or semi-structured data(internal and externalsources – customs andbroker data and email)

Data discovery

How the digital trade and VAT organization can be builtTechnology: sample architecture

Data analytics

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Leading tomorrowTransactional data analytics – an integrated approach

Data analytics

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Transactional data analytics

► With tax authorities increasingly working across functions, companies must anticipate andprepare for a different approach toward tax audits.

► The interaction between transfer pricing, global trade and VAT cannot be left unnoticed.► We are bridging the different areas and aligning different functions in companies.► The result is transactional data analytics.

Data analytics

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ITX data analytics is a flexible and scalableframework designed for structuring,executing and monitoring trade acrossmultinational enterprises.ITX analytics is designed to achieve thefollowing objectives:► Increase efficiency► Manage compliance and risk► Drive business value

Transactional tax analytics: a structured approach to transferpricing, VAT and customs management

Data analytics

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Reoccurring process

Planning andpolicies

1Price setting and

contracts

2Transactions and

journal entries

3Monitoring and

adjusting

4Testing andcompliance

5Controversy and

litigation

6

Mapping oftransactions

Setting transfer prices

Price upload andvalidation

Local budgets andforecasts

Grouping ofcompanies

Acquired companies

Documentationstrategy

Benchmark studies

Transfer pricing policy

Goods and services

Journal entries in ERP

Creation and changes totransfer prices

Monitoring andreporting

Updating ofdocumentation

Adjustments

TP policy check

Check compliance

Review of localdocumentation

Documentation review

Controlledtransactions form

Strategy

Information retrieval

Audit cyclemanagement

APA and rulings

Intercompanyagreements

Controlling of internalsales of services

* Sample activities across the operating life cycle

Condition table setup

Tax code determination andaccounting

… Focusing on integration across the business processesthrough technology and data enablement

Data analytics

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Step 1 – Data extraction from financial systemsStep 2 – Multi system data staging, TP transaction data harmonization, TP attribute, master data sensitization, etc.

Pricing

Technology and data

Consolidation andreporting systems

Bolt-on TP systems

ERP systems

Sample information systems architecture

SAP transactional

Presystems

Order Management Procure-ment

Production Finance

Human resources

Others

Controlling

ERP systemsCRM systemsCampaign Management Quotation Management

Opportunity Management Sales Planning

SRM and SCM systemsSourcing & contract management Demand planning

Supply planning Category management

SAP business intelligence

SAP business warehouse

Barcode scanningsystem

Work progressmeasurement system Order management system Time recording system Others

SAP business objects: transfer pricing reporting

Harmonized TP transactions► Finance (GL)► Revenue, COGS and production

TP master data► Legal entity► Revenue/COGS based► Management attributes

TP attributes► Trading partner► TP supply chain► FX – currency translationDSO DSO DSO DSO DSO DSO

BPF workflowreview and approve - reports

Transfer pricing analysis (BPC)

TP analysis

TP JE Planning Forecasting

Drill-down BEx BO - dashboard Slice/dice EPM BO - crystal

TP workflow

BPC-BPFBW – information broadcast

TP document managementBPC documents

EPM cell attachments

Tax applications

Tax provision Tax provision

3

4 3

2

1

Transactional data analytics: the proposition in practice

Data analytics

Step 3 – TP logic, workflow and analysisStep 4 – TP reporting and TP document management

AM15

Slide 28

AM15 Procure-ment" looks like a typo. Should be "Procurement"Alan Millar, 04/05/2016

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Transactional data analytics: what does bring?

Data analytics

Sample Information Systems Architecture

SAP transactional

Presystems

Order Mgt Procurement

Production Finance

Human Resources

Others

Controlling

ERP systemsCRM systemsCampaign Management Quotation Management

Opportunity Management Sales Planning

SRM and SCM systems

Sourcing & Contract Mgt Demand Planning

Supply Planning Category Management

SAP Business Intelligence

SAP businesswarehouse

Barcode ScanningSystem

Work ProgressMeasurement System Order Management System Time Recording System Others

SAP Business Objects: Transfer Pricing reporting

Harmonized TP transactions► Finance (GL)► Revenue, COGS and production

TP master data► Legal entity► Revenue/COGS based► Management attributes

TP Attributes► Trading partner► TP supply chain► FX – currency translationDSO DSO DSO DSO DSO DSO

BPF workflowReview/Approve - Reports

Transfer Pricing Analysis (BPC)

TP Analysis

TP JE Planning Forecasting

Drill-down BEx BO -Dashboard Slice/Dice EPM BO - Crystal

TP Workflow

BPC-BPFBW – Information Broadcast

TP Document Management

BPC DocumentsEPM Cell attachments

Tax Applications

Tax Provision Tax Provision

3

4 3

2

1

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Questions

Session Title

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