Principle: The conditions needed to benefit fully from technology are, above all, human ones.

Fireside chat:

Taxologist: "OK, let's face it. There's no digital value proposition without technology―that's why we're all here in the first place―but the lion's share of that value is left on the table unless we rethink the conceptual framework around how it's realized. The big problem is mindset. People want digital, but they don't yet think digital. Culturally, their collective compass is set according to the business principle of successful arbitration of goods, labor, transport, and capital. If that's their hammer, then every problem looks like a nail. Lindsay Herbert calls it 'an industrial response to digital problems' in her book on digital transformation."

Intelligent Friend: "Come on! People know better than that. They understand that technology isn't the same as factories, workers, and delivery vans."

Taxologist: "Intellectually, yes―I'm generalizing, of course, but in practice, they have yet to recalibrate their daily thought patterns and ways of working for the digital aspects of business. When the rubber hits the road, deeply ingrained habits die hard. A troubled project history doesn't help either. If they've struggled in the past, they get tunnel vision about how, this time, they will move to the latest tech without mishap, and can easily lose sight of what it really means."

Intelligent Friend: "So, what does it really mean?"

Taxologist: "In simple terms, it means that technology alone isn't enough. And I'm talking about major enterprise solutions with vast data models and business databases here, not just workflows or personal productivity tools. The real value here comes from digital capability enhancing transparency, control, and insight on a scale beyond most people's usual field of reference. The tax authorities are starting to see that now. Take Italy―they cut their VAT gap in half within a year of introducing e-invoicing. Now that's value!"

Intelligent Friend: "So, what's the problem?"

Taxologist: "The problem lies in how that actually works, the exact mechanisms, the vision needed to set it in motion, and the skills needed to keep it going in a constantly changing world. For instance, the Italians aren't sure how to halve that gap again or whether a different strategy would be better or worse―and they've barely scratched the surface in terms of finding answers in the data they've collected. You must remember that these systems are just representations of things that exist or events that happen in the real world, and they're far from perfect. They need a lot of help―but more from functional people, not IT. The people who know and work every day in that world must learn how their digital representations operate and the new ways they create value―and that's quite different from the resource arbitration I just mentioned. As it turns out, most of that new value is only realizable from a transformed state. Without transformation, the technology costs too much and never works as well as it should anyway."

Principle: Digitalization demands “tax data right first time at
source”, not process automation.

Fireside chat:

Taxologist: "We must be careful with this one. If you ask the business what technology is for, they’ll likely say 'automation'—which is fine, except they’re thinking in the Henry Ford sense, where machines replace the jobs that humans used to do. Businesses tend to like this idea and get quite attached to it. Because it's not in their line of sight, they often miss the impact technology can have on those processes in the first place."

Intelligent Friend: "Wait a minute! Are you saying that business process automation isn't important?"

Taxologist: "Not at all. BPA is still important, but it often results in incremental improvements only, especially where downstream data is involved. Take tax reporting, for example. For the past 25 years, the standard process has been: download tax data from the ERP, vet that data in Excel, reformat it manually or with a macro for the tax return, and then file. Most of the work is in the vetting because the data quality is poor and not trusted. Have you ever noticed how tax managers always ask for tax reports with as much data as possible—50 columns if they could? That's because they're using all that information to recalculate the tax for themselves at reporting time."

Intelligent friend: "Sure. But that's not the situation now, right!?"

Taxologist: "It’s getting better, and real-time reporting is putting an end to it all anyway. It’s rapidly closing the window of time where data can be manually manipulated. In any case, companies were already calling time on it due to the costs, tax risks, and inefficient use of skilled professionals’ time."

Intelligent friend: "I get that. But what does this mean for process automation?"

Taxologist: "Put it this way: if the data is correct from the start—like everyone says it should be—and tax trusts that data, the need for vetting disappears. If the process is gone, there’s certainly no need to automate it."

Intelligent friend: "Of course. But it's not that simple, is it?"

Taxologist: "Correct! First, you still have to report that data, but if it’s high quality, reporting becomes algorithmic, which is the ideal scenario for automation. Automation fails when the data quality is poor, because correcting bad data requires human intervention—that’s just how it is, but this didn’t stop some people from trying to automate it anyway. Second, reaching that level of data quality and trust is challenging. Too many factors get in the way, like lack of vision, skills, leadership, the technology itself, and even a basic understanding of what data is in the first place."

Intelligent friend: "Ah, so we do still need automated downstream processes until that's resolved!?"

Taxologist: "Yes and no. E-invoicing is rapidly altering the landscape. If your data isn’t correct before the invoice is sent, tough luck. I’d suggest the best approach is to use technologies like AI and some of the better industry cloud products to improve speed and human productivity for now, while focusing on solving the data problem long-term. By the way, vast amounts of automation are required to maintain a high-quality, real-time tax data model at the source—far more than most people can imagine and certainly more than any human could ever handle manually. So, putting data first actually changes the meaning and value proposition of automation altogether."

Principle: Technology enables tax people to be responsible for tax and tax data at source company-wide.
TX Boot-camp

Fireside chat:

Intelligent friend: "Our global VP of Tax was on a conf call last week and he was quite blunt. He simply said, 'Tax does not own upstream data. That's not our responsibility.'" 

Taxologist: "Interesting. What was the purpose of the call?"

Intelligent friend: "We're modernizing our legacy ERP. It's greenfield, so we're sweeping away old systems, switching vendors, moving to the cloud, and re-evaluating processes. Everyone's trying to figure out what it means for them." 

Taxologist: "What about e-invoicing? Does your VP see that it pushes tax's pinch points upstream?" 

Intelligent friend: "Not really. So far, our approach to e-invoicing has been minimalist and handled by finance." 

Taxologist: "OK, well—if you don't mind me saying—that view is already a thing of the past. While traditional tax departments are pushed back to specialist compliance and loss prevention only, the rest of the company is moving forward. The future is digital. He should accept that and take responsibility. I'm sure he's aware—I imagine he's just apprehensive." 

Intelligent friend: "Should he be apprehensive?"

Taxologist: "Ha, ha! Well, yes, but it won't help. He can either adapt or fall behind. What's the situation regarding a tax engine at your company?" 

Intelligent friend: "We don't have one—well, not a proper one. He's advocating we work with a vendor to get one."

Taxologist: "That’s good, but he's missing a trick. Like many people, he probably thinks the purpose of a tax engine is to calculate tax. It's not—the main purpose of a tax engine is to give tax people control over tax at source. It’s the same as the project. The main purpose of the project is not to install a tax engine—it's to build a tax determination capability in the tax function that values people and data over tech, and gives long-term control over the tax solution to Tax. The point is the tax engine is his opportunity to 'get tax data right first time at source.'"

Intelligent friend: "Wait a minute—so, you're saying the tax engine means he takes responsibility for tax data in the source systems!?" 

Taxologist: "Sure. That's the goal. Of course, responsibility is shared with upstream, and the tax function must be overhauled to handle it—but if he does not take this opportunity, he's running substantial risks as tax authorities ramp up their digital capabilities. They're building sophisticated digital profiles on taxpayers, and he must respond to protect his company's license to operate."

Intelligent friend: "I see. So, digitalization and data are the keys, but that's a major change for him, right!?" 

Taxologist: "Absolutely! In fact, it's transformative in the true sense of the word—not just more tech. In reality, tech is the facilitator that extends tax's reach and enables them to drill down and play a greater role across the organization. Historically, tax managers outsourced it to IT or finance, or left it to chance, because they deemed it not a core competency. That's now a risk. Tax is too complex, changing too fast, and under too much scrutiny to leave to others. If tax can't keep up, how can non-specialists be expected to do it for them? The tools exist. Tax must transform to use those tools to own the space that’s naturally theirs."