Internet tax solutions proliferate

Global Finance, Jan 2001 by Weinstein, Jay

DATA WAREHOUSING

Global corporations are utilizing data warehouses to collect, analyze, and manage their global tax liabilties, thanks in large part to the Internet.

In the moist earth following the Y2K revenue deluge, new software, Web portals, consultation interfaces, and application service providers have sprouted like mushrooms to help multinationals pay the many pipers. From new software for recovering value-added tax (VAT) outlays to Web sites with tools and advice for overburdened tax officers, the palette of new problem-solvers grows daily.

Fueled by recently commercialized computer programs that make tools more user-friendly, the Big Five consulting firms join Web and tech-tax pioneers in bringing accounting departments into the 21st century. "Customers are now investing heavily in Web capabilities," says Ken Cooke, global leader of e-business, tax, and legal services at PricewaterhouseCoopers in San Francisco."We think it's important for the tax departments in these companies to keep pace with the rest of their organizations."

On the ground level such companies as Chevron, Paymaxx, and 400 other Fortune 1000 companies have linked up to Federal Liaison Services' eDP COMpliance to streamline and automate payroll tax compliance, saving millions in delay penalties and labor costs. The first client to sign on to FLS, based in Dallas, Texas-more than a year prior to official release of the product-was the Internal Revenue Service itself.

INFORMATION "WAREHOUSING" FORMS CORE OF NEW-GENERATION PORTALS

Consolidation of far-flung information resources creates a single databank that can be accessed by any branch of a global corporation that may have need for it in tax strategy, calculation, or compliance. Companies such as KPMG, Ernst &Young, and PricewaterhouseCoopers use varying degrees of this technique in their e-tax programs. Such consolidation is the first step toward implementing KPMG's new tax requirement solution portal on the Internet. Not an off-theshelf data product that can be bolted to any system, it's a process, says Michael S. Burke, national partner in charge of KPMG's e-tax solutions, based in Century City, California, that "allows for the transfer of a legacy tax function into an e-tax function."

"The first step in the process is to take all your tax data and dump it into a data warehouse," says Burke."Next, it's applying a tool to define user requirements-compliance, real time analysis, etc."Then, he says, systems "manipulate those data to reduce compliance costs, facilitate VAT planning, and minimize time required to respond to tax audit questions from around the world."

Beyond saving global data-searching man-hours, data warehouses provide dynamic information that the program needs to help CFOs make strategic tax decisions."Say a company plans to implement an e-procurement initiative, saving $100 million," proposes Burke. "That'll mean $100 million additional taxable income. Here in the United States $40 million would go to Uncle Sam and the state. With real-time data [interpreted by a process that applies tax laws from countries all around the globe] you can decide whether that operation should be based in Bermuda, the Philippines, Ireland, or elsewhere, where the tax burden will be just $20 million." Typically, income tax is the tax most addressed by the KPMG portal. This is a system mainly for Fortune 1000 companies, and service packages cost anywhere from $500,000 to $10 million, depending on whether you want the Volkswagen or the Rolls Royce.

PricewaterhouseCoopers is on the cusp of launching a multifaceted site that was impossible before now because the tools it offers were never user-accessible enough to be practical. Buskets of information can be put onto the desktop very easily, allowing users to simply click on a tool to install it on their desktop and start using it. PwC's Cooke says the company's upcoming product, Mindlink, now being beta-tested in the United States and Britain and expected to be launched in early 2001, presents a menu of services and tools, all linked to a central database. "It's a robust Web site using content aggregated from external and internal sources," he says. "It'll bring tax services from 27,000 PwC tax practitioners from all over the world," through its KnowBorders information repository; Online Consulting Services, a 24/7 pay-per-question interface between clients and global experts; MAXIMIN, a cross-border transfer pricing online tool; and an interactive global VAT service, among others. Pricing structure hasn't been set, but the service will be more accessible to middle-market and mid-cap companies, though it's primary market is Fortune 1000 companies.

VAT's HAPPENiNG

Money is abandoned every day Some $8-10 billion in international corporate expenses, eligible for refunding, go unclaimed every year owing to the complexities of the refund application process. Some companies have been outsourcing the recovery process since the late 1980s, when the European Union started allowing tourists and businesses to reclaim the VAT levied on some products and services-at times amounting to as much as 25% of the price paid. Typically, outside collection agencies skim 20% off whatever VAT they recover and return the rest to the client. In 1994 entrepreneur John Powell founded Corporate VAT Management, developing software to recover VAT in-house.