Making tax risk management transparent in the digital era with the Celonis TAX-ray app

In the digital era, nothing is certain except death, taxes and the increasing complexity of tax risk and compliance management. Probably not as apposite nor enduring as the US statesman’s original, but accurate nonetheless in describing the tax compliance management landscape – especially as regards valued-added tax (VAT).

Why? Because many tax compliance management processes are outdated, remaining manual and human resource-heavy.

Multiply this by the complications inherent in global businesses sourcing goods from global supply chains, and then selling them in global customer markets. It all generates complex multi-territory tax liabilities that require navigation. And it can be an unforgiving space, where small mistakes can lead to significant penalties.

It’s against this backdrop that Celonis launched the TAX-ray App as part of our Platform Apps Program earlier this year. Developed in partnership with tax solution experts KMLZ, the new solution is designed to de-risk, optimize, and simplify tax compliance management. It provides a future-proof strategic safeguard for tax professionals – however complex their trading networks. Let’s take a closer look.

Inside the TAX-ray App

From the micro to the macro level, the TAX-ray App delivers high-definition transparency of tax transactions, collating actionable insights into a single intuitive platform. Working hand-in-hand with existing enterprise resource planning (ERP) and tax compliance management systems, the app enables users to easily monitor and analyze tax transactions. Where applicable, the system can also identify and implement opportunities to automate compliance controls.

Using process mining technology, and built on our Celonis’ Process Intelligence Platform, the app integrates tax management data with process data from across an organization's entire tech stack. This allows business rules and territory-specific tax requirements to inform compliance controls at a systemic level – without any need for specialist IT or ERP expertise.

With this in-built knowledge, TAX-ray can visualize any potential risks or errors with tax transactions passing through ERP systems. Any such non-compliances are flagged before transactions are completed. Being able to track transactions in real time, users can apply appropriate VAT controls as soon as the transaction hits the system and by doing so avoid any retrospective corrections. This can save finance and tax teams a lot of time and money in manual rework as well as reducing tax risks.

What makes this approach so powerful is how easily TAX-ray can be adapted to address new compliance requirements, new regulations, newly detected errors, and emerging challenges in the trading environment. The system is built to evolve with business needs, to learn and apply evolving best practice, and to optimize tax compliance management on an ongoing basis.

Without unpicking the entire application, it’s worth examining a few of TAX-ray’s key capabilities – those that are likely to deliver time-poor tax professionals (and their bosses) the greatest benefit.

The TCMS Cockpit

The TCMS Cockpit brings clarity and simplicity to Tax Compliance Management Systems. It provides an at-a-glance management overview of all VAT compliance management controls conducted, specific cases identified, and their current status. In addition, the TCMS Cockpit tracks and documents compliance status over time, using comparatives between historical and real-time data to measure the performance of process improvement initiatives as well as levels of compliance.

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The Business Process Matrix

The Business Process Matrix (BPM) is another major driver of both reporting clarity and productivity. It also demonstrates the TAX-ray App’s capacity to allow users to easily interrogate data relevant for taxation via the Celonis platform. The BPM offers a comprehensive summary of transactions categorized by VAT-relevant criteria for any chosen timeframe. It delivers real-time, actionable insights with minimal drain on team resources. This is a significant departure from legacy approaches to tax compliance management that often rely on lengthy interviews, complex query development, or manual data analysis.

The VAT Report

TAX-ray’s VAT report offers an invaluable tool for VAT filings. Displaying all VAT-relevant transactions over a given time-frame, the report provides a solid, data-defined foundation for VAT-return filings and a means to cross-check VAT returns. In addition, the system enables users to consolidate all relevant entities in a VAT group, providing a holistic, efficient, and accurate approach to managing VAT within complex organizational structures.

However complex the regulatory and trading landscape becomes over time, the TAX-ray App helps ensure businesses remain VAT compliant.

Ready-for-anything tax compliance management

Minimizing tax risk exposure by maximizing the effectiveness of tax compliance management processes has always made good business sense. With the volatility of the current trading environment and the changeability of the tax compliance management landscape, it’s now more like a necessity.

Emphasizing this point, 79% of respondents to EY’s Tax Risk and Controversy Survey say they expect tax audits to double between 2023 and 2025 compared with the previous two years. As a result, one of the report’s key recommendations is that businesses need to strengthen their tax governance, increase their focus on tax data and seek tax certainty. In fact, a full 84% of respondents – all senior tax and finance executives – say they believe implementing or improving an existing global framework approach to tax risk and controversy management will add “some or significant” value to their business in the next two years.

The TAX-ray App enables businesses to do just that…to future-proof their tax compliance management irrespective of the prevailing conditions or legislation. Put another way, the app provides businesses with a robust, ready-for-anything approach to tax compliance management. It automates controls, maximizes productivity, and acts as an early warning system for any potential tax risk.

For more information about TAX-ray, or to learn more about how the best-in-class professional services and software solutions from our partner ecosystem can help you to tap the full potential of Celonis, visit our partner page.