Three Trends CFOs should know to succeed in 2022

By Alex Baulf, senior director of Global Indirect Tax at Avalara, provides a deep dive into the rise of digital tax, e-invoicing, and the complexity of tax legislation, offering his advice on how Chief Financial Officers (CFO) can stay ahead of the curve 

With workforces compelled into remote setups almost overnight as lockdown measures came in to tackle the spread of COVID-19, the impact of this ‘hybridisation’ of our working lives continues to be widespread.

Finance teams have had to navigate numerous changes and rapidly accelerate their digital transformation journeys in response. At the same time, governments have also had to update rules and legislation to account for what now appears to be a settling ‘new normal,’ carrying sizable implications for finance and accounting departments in companies of all shapes and sizes.

Here are three trends that I think will be top of mind for CFOs to embrace this year.

Tax continues to go digital 

Tax digitisation will continue at a pace during 2022. Tax is moving away from summary VAT returns towards real-time transactional level digital reporting. This, in turn, is driving growth in areas such as SAF-T (Standard Audit File for Tax), including data submission to tax authorities and subsequent business audits by tax authorities based on this information.

These dynamics, which evolve continuously, have led to many challenges for finance departments.

Not only are serious questions being asked around what technology is most appropriate, but also about how businesses develop and manage their processes, the quality and granularity of the data they hold and how they interact with their customers, suppliers and tax authorities.

E-invoicing will take off

Tax going digital is also running side by side with the lift-off of e-invoicing.

We are seeing this across many European countries already, which will have implications for companies doing business in these markets.

For example, various e-invoicing systems, pilots and voluntary deployments have occurred in Poland, Slovakia, and Romania, with future e-invoicing mandates in Spain, France, and Germany also announced. Portugal also recently introduced a requirement to add a unique QR code to every invoice.

The European Commission is also seeking to unify the digital tax landscape with its ‘VAT in the Digital Age’ initiative – once in play, this could provide organisations with a common standard for e-invoicing and facilitate more harmonised digital reporting. In any event, this initiative shows that e-invoicing is the clear direction of travel and will continue to spread across the EU.

Meanwhile, the proposals for a single EU VAT registration number and extension of the Import One Stop Shop (IOSS) and One Stop Shop (OSS) are also ones to watch this year.

Tax legislation will remain complicated 

Businesses, especially those trading in multiple countries, must navigate various tax laws and regimes.

While the aforementioned plans in the European Union seek to unify several disparate systems into a straightforward approach, this is far from being a reality just yet. Many countries have complex setups that often are not available in English or other languages.

Meanwhile, a new law or requirement made by one country is likely to be already in place elsewhere. Therefore, tax authorities and governments should collaborate and share best practices based on feedback from their international peers and businesses operating under such rules.

Indeed, all round better engagement among a greater range of stakeholders would be welcomed. That includes businesses such as Avalara, which has already supported thousands of companies navigating complex tax compliance regimes worldwide.

Staying ahead of the curve 

As well as seeking the help of expert partners, CFOs can take several other steps to help tackle the new systems and regimes.

There is still time for businesses to get their house in order by maintaining an indirect tax risk log and roadmap, to identify company risk areas, propose and confirm changes. This will allow finance teams to prioritise certain technology investments and ensure that new processes and procedures are scalable across markets.

This latter point around scalability is significant. When seeking digital tax technology solutions, think strategically and opt for systems that can scale across several territories and easily incorporate updates to e-invoicing and other tax rules.

While it may look like a rollercoaster ride in terms of taxation and digitisation in the coming months, it will pay dividends to dedicate attention to these changes now. The firms that embrace changes and make digital the new normal will start to reap the benefits of more efficient processes quickly compared to competitors.

By Alex Baulf, senior director of Global Indirect Tax at Avalara, provides a deep dive into the rise of digital tax, e-invoicing, and the complexity of tax legislation, offering his advice on how Chief Financial Officers (CFO) can stay ahead of the curve 

With workforces compelled into remote setups almost overnight as lockdown measures came in to tackle the spread of COVID-19, the impact of this ‘hybridisation’ of our working lives continues to be widespread.

Finance teams have had to navigate numerous changes and rapidly accelerate their digital transformation journeys in response. At the same time, governments have also had to update rules and legislation to account for what now appears to be a settling ‘new normal,’ carrying sizable implications for finance and accounting departments in companies of all shapes and sizes.

Here are three trends that I think will be top of mind for CFOs to embrace this year.

Tax continues to go digital 

Tax digitisation will continue at a pace during 2022. Tax is moving away from summary VAT returns towards real-time transactional level digital reporting. This, in turn, is driving growth in areas such as SAF-T (Standard Audit File for Tax), including data submission to tax authorities and subsequent business audits by tax authorities based on this information.

These dynamics, which evolve continuously, have led to many challenges for finance departments.

Not only are serious questions being asked around what technology is most appropriate, but also about how businesses develop and manage their processes, the quality and granularity of the data they hold and how they interact with their customers, suppliers and tax authorities.

E-invoicing will take off

Tax going digital is also running side by side with the lift-off of e-invoicing.

We are seeing this across many European countries already, which will have implications for companies doing business in these markets.

For example, various e-invoicing systems, pilots and voluntary deployments have occurred in Poland, Slovakia, and Romania, with future e-invoicing mandates in Spain, France, and Germany also announced. Portugal also recently introduced a requirement to add a unique QR code to every invoice.

The European Commission is also seeking to unify the digital tax landscape with its ‘VAT in the Digital Age’ initiative – once in play, this could provide organisations with a common standard for e-invoicing and facilitate more harmonised digital reporting. In any event, this initiative shows that e-invoicing is the clear direction of travel and will continue to spread across the EU.

Meanwhile, the proposals for a single EU VAT registration number and extension of the Import One Stop Shop (IOSS) and One Stop Shop (OSS) are also ones to watch this year.

Tax legislation will remain complicated 

Businesses, especially those trading in multiple countries, must navigate various tax laws and regimes.

While the aforementioned plans in the European Union seek to unify several disparate systems into a straightforward approach, this is far from being a reality just yet. Many countries have complex setups that often are not available in English or other languages.

Meanwhile, a new law or requirement made by one country is likely to be already in place elsewhere. Therefore, tax authorities and governments should collaborate and share best practices based on feedback from their international peers and businesses operating under such rules.

Indeed, all round better engagement among a greater range of stakeholders would be welcomed. That includes businesses such as Avalara, which has already supported thousands of companies navigating complex tax compliance regimes worldwide.

Staying ahead of the curve 

As well as seeking the help of expert partners, CFOs can take several other steps to help tackle the new systems and regimes.

There is still time for businesses to get their house in order by maintaining an indirect tax risk log and roadmap, to identify company risk areas, propose and confirm changes. This will allow finance teams to prioritise certain technology investments and ensure that new processes and procedures are scalable across markets.

This latter point around scalability is significant. When seeking digital tax technology solutions, think strategically and opt for systems that can scale across several territories and easily incorporate updates to e-invoicing and other tax rules.

While it may look like a rollercoaster ride in terms of taxation and digitisation in the coming months, it will pay dividends to dedicate attention to these changes now. The firms that embrace changes and make digital the new normal will start to reap the benefits of more efficient processes quickly compared to competitors.