This article is written by Juan Dosal. Juan ([email protected]) is a Senior Consultant in the International Services Practice of RSM Netherlands with a focus on Technology Consulting.
In the current economic landscape, we are seeing those that have benefited, but also those that have temporarily or permanently lost out. These ongoing developments are putting business models under constant pressure. To survive, companies are required to focus on continuous improvement and take advantage of new information. Another relevant development is the management and utilization of data. In this respect, enormous piles of information offer organizations the opportunity to learn more about their customers, employees and processes.
Based on relevant data products can be optimized and tailored to fit specific demands; workflows can be increased; management and market information more accurate. We see that companies are increasingly taking advantage of this data. However, on the other hand, the use of data brings new compliance obligations. Businesses are subject to more and more implicit and explicit rules and there is a growing focus on ethics. Some of these regulations are enforced by institutions, others by the public (opinion). For example, after a ‘transition’ period when coming into force, the General Data Protection Regulation (GDPR) is progressively being administered resulting in fines for non-compliance businesses. This year Amazon saw a fine for 746 million euro being levied for not meeting personal data processing requirements.
Thinking about data, the enormous potential of blockchain does not go unnoticed. In essence, blockchain is a secured (by encryption and decentralization) storage infrastructure. Because copies of transactions are kept at many different locations, the technology offers an waterproof, infallible and transparent manner of administration. Although the computing power needed for these operations is substantial, many (large) corporations are running experiments for example in increasing their supply chain visibility and tracking the movement of goods. Sourcing and ownership can be tracked, potential failures can be traced before they happen.
All the above developments have been noticed by European governments which have released a new set of specific tax compliance regulations for the participants in the sector, such as DAC7, DAC8 and country specific digital taxation services regimes. These developments, coupled with the increasing tax transparency rules and the recent global consensus to reform the international tax framework (BEPS 2.0), are requiring Tech companies to reconsider their strategy to comply with a new set of rules in a booming and more Tech-based market.
There is little doubt that the digitalization trend will continue to develop and that the economic landscape will continue to evolve, thus it can as well be expected that tax transparency requirements will increase and that tax authorities and governments in general will require to become more digital so that they can manage and control compliance with new tax transparency obligations.
Although technology is instrumental in driving business growth and creating more efficient processes that contribute to increased productivity. There are also other aspects that should be considered by companies that are implementing digital means, for instance: what strategy to follow to ensure compliance with increasing new tax transparency requirements; or what approach to follow to ensure compliance with GDPR and other new regulations.
Recent news and current and expected trends indicate that more growth is expected for companies involved in digital activities. However, attention to specific considerations of each European country is key to ensure success. Therefore, the definition of a sustainable strategy requires to consider multiple aspects as, failure to consider one of those could trigger substantial risks. Because of these considerations, sustainable solutions for ensuring compliance require to be holistic and tailored to the specific business challenges and needs of every company.