The complexity of major regulatory changes is starting to take a toll on Global Financial Institutions, a SIX tax data report has revealed. The majority of firms (92.4%) admitted their system upgrades and integration are not set up to support fast changing tax laws, with less than 10% having finished setting up processes for data collection from clients and counterparties.
The greatest concern among organizations regarding tax compliance is managing the complexities of regulations across different tax jurisdictions. More than half (55.8%) of respondents said cross-border taxation issues were influencing their organization’s agenda and, as a result, tax data management is a key focus for financial institutions today. Key tax regulations posing headaches include FATCA – with over a third stating that this law proposed the greatest challenge to meeting data compliance needs. More recent tax changes requiring firms to make imminent changes to tax data, including IRS 871(m), IRS 305(c) and the automatic exchange of Common Reporting Standard (CRS), are big hurdles for certain firms.
SIX’s findings also revealed that firms are not prepared to react to these rapid changes with the processes they currently have in place. The report confirms there is a growing need for organizations to have a strong foundation in place to manage and meet data compliance requirements as firms struggle to keep up with the complexity of recent changes around the world.
Jürg Stalder, senior product manager at SIX said: “Tax regulations have changed immensely over the past few years and increased complexity around these new regulations have posed new challenges for organizations. Firms are under pressure to improve their tax data management processes and, with the speed at which regulation is evolving, it is unsurprising that our survey finds many underprepared.”
Automation is the goal for many organizations as a means to solve this problem. Nearly half agreed that the evolving tax regulation has strengthened the case for automating processes and centralizing information on tax data across the organization however, only 22.4% said they have a fully streamlined and automated process underscoring the need for new methods.
Stalder continued: “The old methods are no longer fit for purpose. Firms must look for new ways to comply including automation and centralization. They must look at this as an opportunity to not only improve their data management processes but also use data more effectively and strategically throughout their business activity.”