26th Annual Health Sciences Tax Conference - EY · Disruptive megatrends and impact on the life...
Transcript of 26th Annual Health Sciences Tax Conference - EY · Disruptive megatrends and impact on the life...
26th Annual Health Sciences Tax ConferenceThe role of technology in today’s tax department
December 7, 2016
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Disclaimer
► EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US.
► This presentation is © 2016 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of US and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party.
► Views expressed in this presentation are those of the speakers and do not necessarily represent the views of Ernst & Young LLP.
► This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does not provide tax advice to any taxpayer because it does not take into account any specific taxpayer’s facts and circumstances.
► These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice.
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Presenters
► Simon KnightbridgePfizerLondon, UK
► Lisa BedardWaters CorporationMilford, MA
► Hadley LeachErnst & Young LLPNew York, [email protected]+1 617 585 3438
► Kyle HarkraderErnst & Young LLPRichmond, [email protected]+1 202 257 9105
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Agenda
► What’s driving technology investments in the tax department?► Disruptive megatrends and impact on the life sciences sector ► Rapidly changing tax legislation and regulatory environment
► What are some of the emerging technologies and approaches to enable today’s tax department?► Assessing automation opportunities► Intelligent automation with emphasis on robotic process
automation (RPA)► Content management + data + analytics
► Q&A
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► What is driving technology investments in the tax department?
► Are there specific goals or expectations that you’ve set?
► How have you gained sponsorship within your company?
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Disruptive megatrends and impact on the life sciences sector
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Guiding principle
Skate to where the puck is going to be, not where it has been.
— Wayne Gretzky
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The forces driving our future: megatrends
Age of discovery Colonialism Bretton Woods trade liberalization East Asian newly industrialized countries China/India/Brazil Latin America/Africa
Industrial Revolution Information technology Mainframes PCs Online (web) Social Mobile Smart Internet of Things
(IoT) Virtual reality Intelligent automation
Demographics is destiny Post-WWII “baby boom” China “One Child” Policy Millennial Workforce Urbanization Aging West Global migration Young India/Africa
3Three primary forces …► Independent variables► Long-term, multiple waves► Interact and catalyze each other
Demographics
Technology
Globalization
… are driving multiple megatrends► Cohesive narratives with significant interplay ► Driven by interaction between the next waves of
technology, globalization and demographics
1. Industry redefinedIs every industry now your industry?
2. The future of smartWhat intelligence will we need to create a smart future?
3. The future of workWhen machines become workers, what is the human role?
4. Behavioral revolutionHow will individual behavior impact our collective future?
5. Empowered customerHow will you change buyersinto stakeholders?
6. Urban worldIn a fast-changing world, can cities be built with long-term perspective?
7. Health reimaginedWith growing health needs, is digital the best medicine?
8. Resourceful planetCan innovation make the planet resource-rich instead of resource-scarce?
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M&A continues to drive growth Life sciences M&A value reaches US$226b in 2016, likely to surpass record-setting M&A total in 2014
Source: Thomson One
0
50
100
150
200
250
300
350
2007 2008 2009 2010 2011 2012 2013 2014 2015 Sep-16
US
$b
Big pharma Big biotech Specialty pharma Generics Medtech
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Legislative and regulatory changes heighten scrutiny
► Country-by-country (CbC) reporting ► Requires information about jurisdictional
allocation of profits, revenues, intercompany pricing, employees and assets. Data often needs to be gathered from multiple systems to comply.
► Final Section 385 Regulations ► Focus on substantiation of
intercompany debt and evidence of creditor/debtor relationship with significant documentation requirements.
► Digital tax administration► Tax authorities are increasingly relying
on digital tax data gathering and analytics to facilitate real-time or near-real-time collection and assessment of taxpayer data.
Country-by-country (CbC)
reporting
Digital Tax Administration
Final Section 385
Regulations
Rise in enforcement
and audit activity
Influences
Impact
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Digital tax administration life cycle
Level 1 Level 2
Para
digm
shi
ft
Level 3 Level 4
Dis
rupt
ive
Level 5“E-file” “E-accounting” “E-match” “E-audit” “E-assess”Use of standardized electronic form for filing tax returns required or optional. Other income data (e.g., payroll, financial) filed electronically and matched annually.
Submit accounting or other source data to support filings (e.g., invoices, trial balances) in a defined electronic format at a defined frequency; additions and changes at this level occur frequently.
Submit additional accounting and source data; government accesses additional data (bank statements), begins to match data across tax types and potentially across taxpayers and jurisdictions in real time.
L2 data is analyzed by government entities and cross-checked to filings in realtime to map the geographic economic ecosystem. Taxpayers receiveelectronic audit assessments with limited time to respond.
Government entities use submitted data to assess tax without the need for tax forms. Taxpayers have a limited time to audit government-calculated tax.
Note: Not all governments collect the same information or treat it the same under this model. Further, the move to digitization is not necessarily linear.
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Digital tax administration evolutionContinuous change
Note: Darker-shaded countries are further along with the implementation of the respective digital tax regimes.
Investing in advanced analytics capabilities,IT and talent
Targeted digital submissions with audit capabilities in tax invoices, auditing, etc.
Strong focus on value-added tax (VAT) digitization; growing use of SAF-T or similar standards; data submission upon audit commencement
Strong focus on near real-time submission of financial/accounting data
Widespread: Common reporting standards, BEPS and country-by-country reporting, exchange of information
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Emerging technologies utilized to address challenges for today’s tax function
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Drivers for investments in technology to support Tax
The future(trends)
Emerging technologies► Intelligent automation► Content + data + analytics
The present(challenges)
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Assessing opportunities for automation
► Identify level of effort and degree of manual/iterative effort required for each tax process. Where is the pain?
► Evaluate if resources are spending time on high-value-added tasks such as review and analysis vs data collection, reconciliation and “wrangling”
► Perform analysis to identify whether existing technology can be expanded to support automation or if supplementary technology is required
Low
Hig
hM
oder
ate
Low Moderate High
[Process]
[Process]
[Process]
[Process]
[Process]
Number of Hours
Manual/ repetitive
L1 processes prioritized
[Process]Highest priority
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The big picture of intelligent automation
Process automation enables organizations to automate existing high volume and/or complex, multi-step data handling actions and workflows to run autonomously without manpower. It captures and interprets existing applications, manipulates data, triggers responses and communicates with other digital systems.
Definition: robotic process automation is the application of a cost-effective software that mimics human action and connects multiple fragmented systems together through automation without changing the current enterprise IT landscape.
Pattern-based machine learning
Statistical modeling
Optimized processthrough automation
Improved workflow
Cognitive intelligence
(CI)Semi-
cognitiveRobotic process
automation(RPA)
Structured data
interaction
Incr
emen
tal
valu
e
Mimics human actions
Augments human intelligence
Mimics human intelligence
Past1990s–2000s
Present Future2015–20 2020+
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A quick glance at how robotics actually works
RPA software emulating human interaction with systems:► A quick video of a proof of concept using an RPA
software, Blue Prism, where the bot assists in the tax provision process
► The professional used to take 15 to 20 minutes to do what the bot does in 3 to 5 minutes!
► Link to Video
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RPA driving enterprise value in transformation
Sits alongside existing infrastructure, governed and controlled by IT
Emulates human execution of repetitive processes via existing user interfaces
Robots are a virtual workforcecontrolled by the business operations teams
4 to 6 X
faster
24/7
<1 Yr.
<1 Yr.
Cos
ts
Significant increase in accuracy with on-time delivery
Increased capacity to handle significantly higher transaction volume
Software robots work with existing IT architecture (multiple robotics providers to select from)
Automated solution works 24/7, driving responsiveness
~$7k–$10kannual license costs per bot vs professional salary cost
Potential payback within a year
Fully maintained audit trail for compliance
Enhanced processing speed compared to human beings
Robotic process
automation
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Content management — a tax platformDefining the technology
SharePoint as a tax platform is an approach to improve the efficiency and effectiveness of the tax function centered around connectivity, innovation and day-to-day operations.
Function Description
Portal ► Access to secure areas with links to needed resources
Document management
► Centralized documents► Version control, access control► Rapid search capability
Processmanagement
► Task tracking► Transparency brings efficiency and lowers risk► Email notification prompting action
Collaboration► Collection and distribution of information with internal and external stakeholders — investors,
accounting firms, investment managers, controllers, deal teams, portfolio companies, administrators
Data management► Tax master and transactional data, centralized tax facts and business rules leveraged by
applications through data governance, security, standardization, mapping and policies► Data robotics integration
Reporting► Centralized, standardized and simplified access to critical data► Predictive analytics ► Visualizations
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SharePoint — a tax platformA smartphone analogy to describe a vision
Core functionality► Document management► Workflow► Reporting/dashboard► SearchHighly leverageable platform► Built on a technology framework (SharePoint, OneSource)► Integrates with other vendor technologies► Additional apps take advantage of core functionality► Apps use the same data sources (e.g., entity listing, accounts,
financial data)► Apps talk to each other (e.g., planning memos into compliance
process)Highly modular ► Document management► Compliance status tracker (i.e., workflow)► State apportionment management► Legal entity tracker► Data/reporting/analytics/visualization
12:38
State Appnt Entities
Workflow Reports Search
Capital Calc Planning
Audit Manager Operations
Transfer Pricing FIN 48
TP
Tax Accounting Research
Training
Documents
Collaborate
Tax Policies
Support
Operations
K-1
Tax Accounting
Tax News Tax Alerts
Compliance
Issues
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Changing project preferences Rapid solution delivery vs historic approach
His
toric
tran
sfor
mat
ion
appr
oach
Rap
id s
olut
ion
deliv
ery
Time
Time
Attributes► High investment threshold► End-to-end thinking► Significant IT expertise► Inertia to change
Attributes► Low investment threshold► Solutions focused, within a strategic vision► Lower IT expertise► Nimble, refine plan over time for emerging needs► Faster value realization
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Analytics for TaxNot all analytics are created equal
Ad hoc queries/standard reports
4th quartile capability
Alerts/query/drill down
2nd/3rd quartile capability
Optimization/predictive modeling/
simulation
1st quartile capability
Audit analytics capabilities Industry-leading analytics capabilities
Hindsight Insight Foresight
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SAP
HFMHTP
JDE
ONESOURCE
Analytics engineData sources Dashboards & visualizations
Finance, IT, Controllers
Stakeholders
Tax Department
► Many analytics companies in the marketplace today are dominated by data warehousing and enterprise dashboard/reporting solutions.
► Most clients still struggle to embed analytics into operational decisions in a systematic and repeatable way, oftentimes resulting in clients not realizing the full value of analytics.
► Clients are improving performance, managing risk and driving the right decisions by utilizing analytics reports built with a view toward meeting key business needs and objectives.
CORPTAXLONGV
The key to success in utilizing analytics is to understand source data and business needs
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Modeling and forecasting► Effective tax rate (ETR) modeling► Stock option ETR impacts
Time savings► Year-over-year reviews► Identification of outliers within a computation► Identification of missing or inaccurate data
How analytics and visualizations empower the tax function
Risk mitigation► Status monitoring► Complete and accurate data ► Identification and analysis of substantive issues
1
2
3
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Risk mitigation: gaining visibility over VAT compliance
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Risk mitigation: gaining visibility over global tax controversy
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Risk mitigation: analyzing country-by-country reporting
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Risk mitigation: tracking debt balances for Section 385 compliance
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Time savings: state income tax apportionment analysis
Click on any amount above or any state on the map to view that state’s
apportionment data in the table below.
Choose the apportionment factor to display (sales, payroll, property or overall), as well as the filing type
(separate versus unitary/combined).
The State Income Tax Apportionment Analysis dashboard is intended to facilitate review of the state apportionment factors and underlying apportionment data, by state and entity. Users can view the data either as amounts or as percentages.
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Time savings: tracking earnings and profits (E&P)
Select a country to display
country/entity detail below.
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Modeling and forecasting: effective tax rate (ETR) analysis
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Data analytics best practices
► Data visualizations are used to empower your audience by providing a high-level overview of information. The key is to understand your audience and know what story they are looking to tell from compiling and analyzing the data.
► Key items to consider:► Keep visualizations and dashboards simple and digestible► Choose the right visual for your purpose:
► Dashboards allow for filtering of different categories based on underlying data source.
► Line charts track changes or trends over time and show the relationship between two or more variables.
► Bar charts are used to compare quantities of different categories.► Pie charts are used to compare parts of a whole.
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EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US.
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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.