Tax regulations have become increasingly challenging in recent years, and new transparency requirements have placed financial institutions under growing pressure to improve the processes around tax data management. With complex cross-border taxation challenges, and different tax rates for different asset classes, there is a trend towards financial institutions looking to streamline tax data processes to reduce the need for manual intervention, and enable automation. Whether financial institutions already have projects underway or are just initiating them, they should ask themselves three questions:
1. Do We Get the Right Data?
As tax continues to have a bigger impact on returns, IT and operations can present a strong business case for making changes to the data and systems underpinning tax processes. The greatest concern for organizations regarding tax compliance is managing the complexities of regulations in different tax jurisdictions and potentially overlapping regulations, highlighting the need for robust data management systems. If clients are to make informed investment decisions and understand when a transaction may be hit by taxation, it is paramount that they receive accurate data from financial institutions — including, but not restricted to, historical data.
2. How Do We Tackle Technology?
It is now widely recognized that changing tax requirements could have far-reaching consequences for businesses, including potential effects on product offerings and profitability. As a result, more and more financial institutions are assessing what needs to be done to comply with these changing requirements and setting up processes that are fit for an ever-changing market. The challenges that need to be addressed in the planning phase range from ensuring data is easily consumable and digitized to enabling easy integration of new data into existing systems and processes. The new tax-intensive environment requires financial institutions to reassess tax data sourcing models and evaluate the need for new data management systems to centralize data at an enterprise level.
3. Are We Prepared for Complexity?
With no end in sight for the wave of changes to tax schemes, financial institutions must ensure that the processes being established now offer business flexibility and build stepping stones towards end-to-end automation. The tax burden facing the industry has resulted in a strong business case for replacing outdated manual processes, systems and tools with automated ones that help streamline tax data management. With a strong basis for managing tax data, financial institutions will be better placed to reduce the need for manual intervention and serve clients by ensuring easy access to the relevant tax rates for individual transactions.
Free Whitepaper: “Fast-Forward into a New Era of Tax Management”
Get more insights on these three questions for your company, along with the findings of a study conducted by SIX among industry professionals, in our whitepaper paper “Tax Data Report: Fast-Forward into a New Era of Tax Data Management.”
Jürg Stalder has been a Senior Product Manager for reference data at SIX since 2014. In this role, he is responsible for developing data services for financial institutions to help them meet tax, regulation and compliance requirements such as FATCA, IRS Code 871(m), CRS (AEI) and Financial Transaction Tax regimes. Jürg Stalder holds a Masters in Modern History & Political Science (University of Berne, Switzerland) and a CAS in Financial Markets Regulation (University of Zurich).