Top TaxTech Tips for 2023
We recently held a fireside chat – What Digital-First Companies Need to Know Heading Into 2023 – with our friends at Thought Leader Global. The webinar featured insights from Erich Tschopp, Director of Global Indirect Tax at Airbnb, and Rob van der Woude, the former Head of International Tax at Uber (and Fonoa’s Chief Tax Officer). The goal was to help tax professionals learn key lessons from this past year and offer a glimpse into what 2023 will bring. If you missed it, you can watch the whole thing here.
We’ve also consolidated and excerpted highlights from the chat and provided them below. Let’s dive in!
How TaxTech has changed over the years
van der Woude: [At Uber when] we were launching really fast, our market was exploding from the minute we launched in terms of transactions. We knew we had to automate, and we needed to have technology to handle it. At that time, there was no technology that fit us – from a model and from a global presence point of view. We decided to do it internally. In hindsight, that may not have been the smartest move, looking at the complexity that it brings. Looking at it today versus back then, I’d benefit a lot from the tools out there that are practically off-the-shelf.
Why tech skills are critical for tax professionals
Tschopp: In accounting programs in a lot of US universities, teaching skills about Tableau or other types of automation software is part of their [coursework] because those are important skills to bring to the table. There’s got to be an understanding of various types of technologies and not just, ‘What does code section §1248(b) say?’ That’s not enough anymore.
van der Woude: It depends a little on the level of the role in terms of what you’re doing where. If we’re talking about in-house people these days, I feel like it’s important to at least understand the technology landscape and what’s out there, what’s possible. There’s people who don’t have a decision in terms of what they want to use or the direction they want to go in. But being able to orient yourself on that properly is really important. I think everyone should have access to these tools when they’re going through their education.
Tschopp: That’s a good distinction. When we’re doing data [analysis], I [tell our team], ‘Here’s the expected behavior. Now go translate that into something the engineers can understand.’ I’m not an engineer, I’m an attorney by trade. But I’ve spent a lot of time in the last decade delving through technology to really understand how it works because it allows me to understand it and turn it into plain English so [our engineers] can understand it and make those decisions.
van der Woude: It’s also helpful in your conversations with governments. At your level at your type of company, I think it’s super crucial to understand what’s possible. Because sometimes governments don’t – and they can ask for requirements that are not feasible at all. I think it’s helpful to know that, but also from a directional thinking standpoint. Oftentimes what I see when talking to companies in my current capacity is that there’s a split between the tax team and fintech teams versus the in-house IT and engineering teams that are also stakeholders in these kinds of conversations. And I feel like tax people could be armed better if they’d have more information to counter some of the arguments that are important for the technology side, but don’t necessarily address what tax people find important.
How to prioritize your company’s investment in TaxTech
Tschopp: The key to your communication [to leadership] is focusing on impact – supply, demand, pricing, things like that. A financial statement impact resonates with the business folks and the CFO. That’s how you get them to listen and walk down that path on why that investment is so important. We’re no longer in a day where you should do everything yourself. You should balance the needs of what’s available externally versus what you want to do internally, and then make those resourcing allocations.
van der Woude: Even in the tech sector where you have engineers internally, they’re still a very scarce resource. I feel like a lot of companies don’t have the opportunity to use their own resources even if they know what they want to build or maintain over time. Making that impact case towards stakeholders is crucial. But hard. Not everyone understands the [value of TaxTech] yet.
Two key tips for companies looking to start a marketplace
Tschopp: I talk to a lot of people moving into the space, and I have two simple tips.
Find someone in the space to go through all the aspects of what you need to think about. Networks are important so you can bounce ideas off of each other – otherwise you’d be figuring [everything] out from scratch. Understand what you’re getting into. Use it to get the clarity you need. What are the key issues?
I spend a fair amount of time talking to people in my network at other Platforms, and speaking to people at companies that want to create Platforms. At the end of the conversation, they usually say, ‘Wow, that’s a lot I need to figure out and deal with.’ We’re all a support network for each other.
#2: Prioritize technology
Create a technology plan. That technology plan is a combination of internal and external [resources], automation, and more. Think about that plan and the investment [required]. You have to start thinking about technology from day one.
You want to get technology resources, but it’s important to think about what technology you need to make this happen. There are so many solutions out there. Whether you want to do something in-house, you want to outsource it, or some sort of combination. You don’t have to go through a lot of those pain points that some of us did early on, through all those uncertain times.
How TaxTech can help manage global tax compliance
van der Woude: A lot of established companies are beginning to find out that a marketplace model – and there are a lot of different types of models – is an interesting channel from a commercial point of view next to the core business, or next to the other challenges they have in the DTC space.
What they don’t typically see up front is that there’s a lot of additional complexity coming with that, especially on the underlying Platform Seller or Platform Buyer side. Key facilitator rules popping up left and right around the world are not that easy to deal with, not only from a tax engine point of view with being able to deal with the complexity, but also from an underlying business point of view. Platforms should ensure that the actual customer experience is good for both the seller and buyer side. You still have a role to play as a Platform. It’s a lot more complicated than many companies expect.
On top of that, you have the recent e-invoicing, CTC or digitalization taking place across the world – originating from LatAm, but now it’s everywhere – that makes it quite hard for companies to comply with all the rules.
Tschopp: This isn’t [the type of situation that’s like], “Ok, here’s this regime – build and comply. Done!” It inherently develops over time. Take DAC7 and what we see with the amount of rules. DAC7 is being transposed into the 27 member states. But for TIN verification, there’s an ability to verify VAT IDs, but there isn’t [a way to verify] individual TINs. You’ll potentially see countries thinking about building their own API solutions, but how do you manage that? From a technology aspect with DAC7 alone, it’ll be years of development and growth and adjustments. And years of companies like ours thinking about, “Ok, how are we going to deal with it and meet those challenges?” It’s not one and done – it never is.
How Fonoa can help with your TaxTech needs
Whatever challenges you may face in 2023, Fonoa can help you overcome them with ease. From automating tax determination to reporting in real time to issuing compliant invoices, Fonoa is there. We can also help you submit error-free returns, adhere to Data Sharing laws, or achieve total control of your tax environment – all from a single platform.