Taxology Part 3: Why ‘Data’ Matters

Part 3 of 5: Key Concepts in the Future of Tax

 Cliché Busting: The Substance Behind the Sound Bites

The third concept under review, namely ‘data’, is without doubt the most impactful to the future of tax. As a paradigm-shifting medium for tax information, digitalized ‘data’ is firmly in the process of redefining the industry, and it is the focal point around which all tax transformation revolves.

This sentiment is expressed in two powerful statements which we like to share widely and often:

As oil was to the energy industry in the 20th century,
so data is to the tax industry in the 21st century.”

…and as tax authorities turn ever more towards transaction level e-regulation:

 “Your tax position is no longer what you say it is,
it’s what your data says it is.”

While the impact of this on tax advisors remains muted for now, for in-house tax professionals acting as full business partners to the rest of the organization, it’s turning their world upside down.

Gone are the days when tax preparers sit at the edges of the system and data wrangle ERP downloads in Excel before submitting to authorities. As data reaches jurisdictions at speeds and in quantities greater than ever before, the tax function is left with one option and one option only that makes sense:

Get tax data right first time at source.”

But before digging deeper on that, let’s first take a step back and ask an important question – Why all the fussWhat is so important about ‘data’? (Note: we use single quotes when referring to ‘data’ in concept rather than the data itself).

It’s hard to avoid the default view that ‘data’ is little more than paper documents held in digital form. Excel does little to dispel that myth because it’s only one small step up from paper, albeit using a digital medium. The same is true of e-filing.

However, corporate-wide data & tax data held on powerful database platforms using sophisticated business data models and supported by ever-improving enterprise applications and query tools, is an entirely different prospect altogether.

If handled correctly, this data platform acts as a window onto your entire company – a digital twin, if you like, a mirror on the whole organization, instantly available and constantly updated. It offers in-house tax professionals complete access to their domain at speeds and levels of granularity previously unimaginable. Like giving eyes to a person born blind, it’s an utter game-changer.

And make no mistake, this is exactly what the tax authorities are after as well. They’re scrambling to build up sophisticated digital profiles on their taxpayers and gain holistic visibility and control over their hinterlands in same way that in-house tax professionals should be looking for in their own organizations.

However, there’s a problem or two:

  1. Bad data and garbage in, garbage out are pandemic in today’s corporate databases, and;

  2. Lack of enterprise data skills and ‘data’-literacy means few, if any, know how to improve this (even CDOs – chief data officers – have a poor track record).

 As a result, data is frequently a risk-laden, corporate liability instead of the highly prized assetor even THE most valued asset – it should be.

The data industry and data sciences don’t help much either. They typically focus on managing vast data reservoirs and gleaning golden nuggets from its depths. Only a relatively small part of the industry deals with pinpoint preciseness and the uber-accurate reflection of the entire organization in data that tax desires.

As such, “getting tax data right first time at source” seems like a forlorn hope, as does trust in data. But as tax authorities lift their approach to data from plumbing to meaning, this is an escalating risk. The last thing in-house tax managers want is for the authorities to know more about their companies than they do. There’s no value in that for their stakeholders.

So, what’s the way forward? Well, in our opinion, it starts with a manageable, meaningful, and realistic approach to ‘data’ that does not cost the earth.

Our starting point at Xyto and partners is the business stories that data, a.k.a. the digital twin, tells you, or should tell you. For example, any VAT manager will tell you how B2B VAT numbers work in the EU, but is this correctly reflected in data and the systems?

To answer that question is a simple exercise in data modelling that anyone can do if shown how. Completing this exercise for 10-15 key business data objects is all it takes to turn the corner, and start treating ‘data’ as the bedrock of the tax function.

In Part 4 we explore the challenge of rapid digital upskilling, mushrooming tribal knowledge needs, the social influencing required to elevate the role of tax, and how wiki-style knowledge management has a critical role to play in all of this.

Taxology Part 1: Why Agile Matters

Taxology Part 2: The Essence of Transformation

Key Concepts in the Future of Tax – A five part series

­­­­­­­In one sense, taxology is about excellent delivery of tax technology with built-in digital future-proofing

Xyto and partners are all about realizing both for the price of one, such that… 

Their combined value is far greater than the sum (cost) of their parts. 

But how? … Well, it’s really no big mystery. We’re not trying to hide secrets. 

We simply run journeys that unshackle the most powerful concepts already available today! 

These are not new and many in tax have heard of them, yet they remain curiously out of reach

This 5 part series looks at the truth behind five critical keywords that tip the balance when tax adopts meaningful digital enablement. 

Until next time,

A Big Step Forward for Digital Readiness in Tax

Congratulations, Giulia! – our latest certified taxologist!

Giulia was a great student and made every effort to ensure she grasped the principles covered. She went the extra mile during certification and tackled all available questions.

We asked Giulia a few questions about her experience with the program:

As a VAT manager, I was struggling mainly with two aspects:

1) interacting with IT and trying to find a common “language”  to solve issues and/or make improvements to the system, as I was convinced that they should be responsible for the technology and have all the answers; and 2) managing/supporting technology-related projects (e.g. system improvements; new tax engine implementation) as most of them would end up not meeting expectations. As a result, I felt frustrated and powerless most of the time.

“What made you want to work with us?

I came across the course because I was interested in learning more about tax technology and, more precisely, about how to make technology implementations successful and your course seemed to offer exactly what I was looking for. I heard positive reviews about the course and yourself and I decided to enroll.

“When you first came to us, what were your biggest hopes and desires?

My biggest hope was to get a better understanding of tax technologies; to acquire the right methodology/mindset to successfully deal with implementations; and to learn how to communicate with different departments to ensure tax requirements would be fully understood.

“And what have been the most valuable outcomes from our work together?

You have provided me first of all with a vision. And not only did you provide the answers I was seeking, I got much more than I expected besides.

 Although this is only the beginning of the journey and there are still so many new things I have and want to learn, I feel that I now have the right mindset and tools thanks to what I learned from the course material and our one-to-one sessions. You have provided me with valuable insights and recommendations and helped me become more open minded. I had to challenge my acquired knowledge a lot, unlearn and re-learn, and although I am conscious that the journey is still long, you put me on the right path.

“Thank you, Giulia. It was a pleasure working with you, and I look forward to working with you further as your journey unfolds.”

          Learn more.                      Connect with Giulia on LinkedIn.



Coming Soon: The New Tax Function

How far are you on your digital transformation journey? The scale below may offer some guidance.

Starting at the top, which is the last statement that accurately describes your tax function today (be honest)?

5% – the word “transformation” has entered the lexicon but plans are non-existent or lack coherence

7% – a tax or IT professional is put in charge of tax technology without any proper training

10% – the company is digitalizing and tax is tagging along, but transformation initiatives have little or no transformation in them

20% – a significant, corporate data initiative is in progress but not yet effective

30% – hiring of taxologists has begun, but the company is unsure what to do with them even if they can be identified and found

40% – a major mindset shift at the top, not just in tax; a true break with the past is acknowledged

50% – a reorg brings tax business and tax IT personnel under the same delivery structure

60% – a truly transformative vision is articulated, along with realistic mechanisms for fulfilment, governance, and control. For the most part after the reorg, everyone left now “gets it”

70% – momentum builds, successes mount up, a critical mass is reached. Fixed SOWs are pushed aside in favor of more agile co-sourcing, upskilling, “gig” consultants, collections, online communities, and tools

80% – tax professionals are genuinely becoming digitally aware, tech-savvy, and data literate. Patience with static, over-engineered, complex point solutions and tax applications is wearing thin. Continuous innovation is taking hold

90% – tax data is under holistic control and fully “trusted”. Tax are no longer just subject matter experts but full business partners to the rest of the business

100% – tax technology is a core competency of a new, fully digitally-enabled tax function.  Modern tax professionals define themselves by their prowess with enterprise data and the advanced tools they use.

Notice that automation does not appear anywhere in this list. That’s because business process automation is not digital transformation. They’re both relevant, but quite different. Automation brings efficiencies to your current tax function ecosystem, whereas transformation questions every part of that ecosystem, ransacks it, and then rebuilds it according to the new rules of digital tax. As a result, one rarely leads to the other.

Neither does hiring a big name consultancy appear in the list. While they have their place, commercial imperatives demand they play to your current mindset, not a transformed one outside your comfort zone. Real change must come from within.

Also, forget running RFPs to solve the problem. New technology itself will not cause transformation. In the digital world, “technology” needs re-orchestrated people, process and technology to bring anything more than incremental value at best.

So, think differently and explore first, if you want your tax function to truly perform and transform in the digital-era.

The Five Laws of Tax Data

Hundreds watched the insightful tax ‘data’ video from the last post and loved it, but thousands felt 13 minutes was too long and bypassed it. I sympathize – I would bypass it too if I’m busy, even for a snippet so central to the future of tax. So, here’s a short, sharp, incisive lead-in:

The Five Laws of Data for the Digitally-Enabled Tax Function:

Law #1: ‘Data’ is at the heart of digital-enablement

Strategy: Be clear that enterprise ‘data’ is the absolute cornerstone of digital capability.

Law #2: Digital ‘data’ changes the rules of the game

Strategy: Acknowledge that new ways of thinking and working are inherent to being data-driven.

Law #3: ‘Data’ is a strategic asset in its own right

Strategy: Recognise that ‘data’ has intrinsic value and requires a data first approach.

Law #4: ‘Data’ outranks automation

Strategy: Set automation strategies to first and foremost support the data model.

Law #5: ‘Data’ only exists in a transformed space

Strategy: Learn to navigate the transformation journey and transition to data-centric operations over time.


‘Data’ thrives within the context of people, process & technology  where ‘technology’ is platform-based and ‘people’ are digitally-enabled, tech-savvy, and data literate. This is the opposite of business process automation with labour cost-arbitration as its yardstick. ‘Data’ requires upskilling and can only take centre-stage once it is fully “trusted”.

For a vital piece of information on how to make this happen using “real-world” tax data modelling, here is the video again It is well worth the small time investment. Enjoy.

Tax Data – Secrets Revealed

‘Data’ is the key to digitally enabling your tax function, and this is well understood. But few know how to make this actually happen. What’s more, it’s easy to get off on the wrong foot.

So, how have some companies made tax data a true strategic asset? Watch this 13 min video to reveal their secret.