Despite longstanding uncertainty around Pillar Two, one thing is certain – Pillar Two creates enormous challenges for tax professionals. OECD guidelines for multinational enterprises could pose a technological and logistical nightmare for tax departments already stretched thin.
For a new tax regime of Pillar Two’s scope, corporate tax technology is necessary to meet expectations and keep tax staff on the same page. It’s the foundation of a coherent, organized, and streamlined process, no matter your organization’s size or tax expertise.
We encourage you to explore all technology options, from Excel to dedicated systems. As you do, make sure each option brings these five must-haves to the table to empower Pillar Two success:
- Your data should be protected.
- Your data should be accessible.
- Processes should be automated to the fullest extent possible.
- Processes should be consistent, simplified, and replicable.
- Education should be facilitated on multiple levels.
1. Data should be protected.
Huge volumes of Pillar Two information will be collected and processed around the world. Manual movement across systems risks losing data or changing numbers one place and not another. If you’re working in Excel, the volume of data alone may easily overwhelm it, leaving you vulnerable to crashing spreadsheets, broken links, and hidden errors. This requires more reconciliations within the process — adding work and complexity.
On the people front, an endeavor of this magnitude is prone to a lack of clarity and structure around who’s responsible to manage, secure, and share highly sensitive data. Two team members can be working in the same workpaper without knowing it, and user permissions and passwords are hard to maintain. And if an employee resigns with work saved on a local drive, you could be recreating critical workpapers.
The right tax prep software safely stores Pillar Two data in one place with layers of security protocols — and limits access to authorized users. Automated data movement between systems reduces human error, and users know they’re working with accurate, current data. If questions arise, audit trails down to source data provide answers. Ensure your technology solution protects your data’s integrity, and you can actively manage access rights.
The CSC Corptax® Global Minimum Tax solution (Corptax GMT) leverages well-established security protocols at multiple levels to control functional access and protect sensitive data. Entry into the system and day-to-day work is controlled, and it’s easy to access up-to-date data. This reduces the number of reconciliations needed. Plus, detailed audit trails document the history of every number down to meta data. If something seems amiss, you know who entered data and when.
2. Data should be accessible.
Stakeholders around the globe will need access to Pillar Two data. A tax system furnishes a user-friendly hub from which all teams can quickly get exactly what they need. And more than that, they get data that’s immediately usable: structured, sorted, and available from summary and detailed levels down to metadata.
For a process the size of Pillar Two, all teams should rely on a “master” dataset that consolidates and centralizes data from multiple sources — and provides a single source of truth. This removes complexity, miscommunication, and time spent reconciling and moving data — all which cause unnecessary risk.
When tax efficiencies allow tax pros to work smarter vs. harder, job satisfaction goes up and turnover goes down, increasing stability.
Corptax data is centrally housed in a structured, usable format. Corptax GMT adds a layer of metadata mapping the trial balance used for provision and compliance to an entirely new set of accounts based on Pillar Two model rules and the GIR. The same trial balance is used for all three processes without the need to move and reconcile it.
3. Processes should be automated to the fullest extent possible.
Automation not only accelerates tax work, it directly reduces risk, full stop. Reimporting, rekeying, and manually moving data is error-prone. Spreadsheets that rely on copy/paste to transfer data – and jumping between systems to push and pull data – open the door to unneeded reconciliations, omissions, and errors. Data should be organized in a way that automatically maps the source trial balance, adjustments, exclusions, and calculated amounts to the GloBE Information Return (GIR) for reporting.
Process automation collects source system data hands-free and makes storing, tracking, finding, and reusing data seamless. You will quickly:
- Know applicability of transitional and/or permanent safe harbor tests
- More easily determine GloBE income and Covered Taxes
- Manage exclusions and adjustments
- Understand how source and calculated amounts flow to the GIR
And, you can automatically integrate data into your provision and other vital components of the corporate tax continuum, including Country-by-Country and international calculated results.
By eliminating human error from critical processes, automation instills confidence. And by driving countless hours from tax planning and prep, automation affords preparers time to review and analyze results.
Corptax GMT leverages Corptax’s automated ETL technology, including its API functions, to automate transformation of data from various sources into a common chart of accounts. As an established tax enterprise system, Corptax GMT will support the schemas for electronic transmission of Pillar Two obligations across the globe. Further, data is ready to integrate into the GIR and quarterly and annual provisions.
4. Processes should be consistent, simplified, and replicable.
The entire Pillar Two team should be supported by the same technology. If local teams manage calculations and obligations with tools that don’t communicate, it’s difficult to maintain a standard set of data and even harder to consolidate results into a global analysis.
When processes are consistent across the board, teams don’t have to document divergent processes and aggregate and reformat data – saving serious time and preserving data integrity.
And as Pillar Two unfolds going forward and resource demands change, common processes in a single platform make it faster to train all involved parties and get new people up to speed.
Corptax GMT uses the OECD model rules as the basis for its calculations and the GIR as its basis for reporting. It can be used globally as the single standard calculation and addresses local country rules as well. Corptax GMT will monitor enactment from country to country and integrate variations into the solution — saving team members a significant lift.
5. Education should be facilitated at multiple levels.
Tax is responsible for training three groups: the dedicated Pillar Two tax team, the rest of the tax team, and the organization at large. Your technology should make it easy to educate all three.
- On a functional level, streamlined, replicable processes make it much easier to train Pillar Two tacticians as the process evolves over time — and to train resources new to the team. One tax system allows you to educate all teams just once vs. over and over — and keep everyone on the same page.
- On an operational level, a tax system allows the general tax team to understand Pillar Two’s impact on provision and compliance. With everyone using one framework, it’s easier to maintain consistency and manage resources. And when Tax Management wants to review the numbers themselves — they’ll appreciate fast access to complete audit trails and detailed reports.
- On a strategic level, Tax is responsible for educating the organization at large. Tax tech will help you generate visualizations that identify risk and opportunity, quantify impacts, and easily share findings with non-tax people who depend on them.
Be sure your solution uses broad and narrow datasets to:
- Perform detailed calculations by country
- Organize results into reports for review
- Create analytics that translate and illustrate impacts all people can quickly absorb
Analytics come standard with Corptax GMT and can be modified to meet your specific reporting requirements. As a complete Pillar Two solution, Corptax GMT can use large volumes of data to perform detailed calculations by country, organize results into reports for review, and condense data into analytics that illustrate impacts. Those analytics also provide a mechanism to understand the relationship between the organization’s structure and source data — and how Pillar Two policies determine causation and trends.
All tax technology is not created equal, so make sure your choice checks the boxes covered above. For a status check on your Pillar Two process, a demo of the Corptax GMT/CAMT planning solution, or answers to any questions, contact us at 800.966.1639 or info@corptax.com.
For a comprehensive guide on optimizing the Pillar Two process, download Your Complete Pillar Two Playbook.
About Gary Colbert
A recognized thought leader in corporate taxation, Gary Colbert is a Senior Director on the Tax Law Analyst team. He helps clients understand market trends and evolving tax law and how they will impact their companies. Gary is a registered CPA and holds a Juris Doctor from San Joaquin College of Law.
